| Word | Meaning | Example |
|---|---|---|
| examination | the act of looking at something closely (as for mistakes) | An audit is the examination of the financial report of an organization - as presented in the annual report - by someone independent of that organization. |
| equity | the difference between the market value of a property and the claims held against it | You can drive sales for awhile, but building lasting equity value is more challenging. |
| summary | briefly giving the gist of something | The financial report includes a balance sheet, an income statement, a statement of changes in equity, a cash flow statement, and notes comprising a summary of significant accounting policies and other explanatory notes. |
| examine | observe, check out, and look over carefully or inspect | When examining the financial report, auditors must follow auditing standards which are set by a government body. |
| exception | an instance that does not conform to a rule or generalization | With some exceptions, all organizations subject to the Corporations Act must have an audit each year. |
| structure | a thing constructed; a complex entity constructed of many parts | Other organizations may require or request an audit depending on their structure and ownership or for a special purpose. |
| assurance | a binding commitment to do or give or refrain from something | The main reasons for the audit are to provide reasonable assurance that the financial statements are free from material misstatements and errors and to ensure that all events that can adversely affect the company have been disclosed. |
| error | a wrong action attributable to bad judgment or ignorance or inattention | The audit discovered many accounting errors. |
| comply | act in accordance with rules, commands, or wishes | These audits ensure that the companies have been complying with the terms and conditions of the contracts. |
| requirement | something wanted or needed: necessity | Bonding companies all have different rates, requirements, and standards. |
| approve | judge to be right or commendable; think well of | Some companies are very liberal about whom they approve, while others approve only those clients with great credit ratings. |
| collateral | a security pledged for the repayment of a loan | With these differences come different premium rates, and some companies even require cash collateral. |
| accurate | (of ideas, images, representations, expressions) characterized by perfect conformity to fact or truth ; strictly correct | The audit showed that the corporation had been very accurate in its financial reporting. |
| evaluate | evaluate or estimate the nature, quality, ability, extent, or significance of | The purpose of an audit is to make sure that the facts the business provides to the bonding company are accurate so that the bonding company can evaluate risk and charge the customer an appropriate rate. |
| risk | a source of danger; a possibility of incurring loss or misfortune | The accountants calculated the risk that each investment held. |
| exempt | (of persons) freed from or not subject to an obligation or liability (as e.g. taxes) to which others or other things are subject | The government refused to accept that the company was exempt from paying taxes. |
| entity | that which is perceived or known or inferred to have its own distinct existence (living or nonliving) | These governmental and tax-exempt entities are audited on a case-by-case basis. |
| conduct | (behavioral attributes) the way a person behaves toward other people | For example, financial statement audits are conducted for American Indian tribes that operate casinos to make sure they comply with state gaming requirements. |
| funds | assets in the form of money | In the case of governmental agencies, these funds come from tax dollars. |
| program | a system of projects or services intended to meet a public need | All government programs are audited annually. |
Exercise
Open the exercise to begin the activity. Follow the instructions in the document.