Y
Yellow Book - Written by the GENERAL ACCOUNTABILITY OFFICE, the yellow book sets forth standards to be followed in auditing the FINANCIAL STATEMENTS of entities that receive federal financial assistance. "Yellow Book" is the name given to "Government Auditing Standards" issued by the Comptroller General of the United States which contains standards for audits of government organizations, programs, activities and functions, and of government assistance received by contractors, nonprofit organizations and other nongovernment organizations.
Yield - Return on an INVESTMENT an investor receives from DIVIDENDS or INTEREST expressed as a percentage of the cost of the SECURITY.
Yield to Maturity - Rate of return on a SECURITY to its maturity, giving effect to the stated interest rate, accrual of discount, or AMORTIZATION of PREMIUM.
Z
Zero-Coupon Bond - BOND on which the holder receives only one payment at maturity which includes both PRINCIPAL and INTEREST from issuance to maturity.
W
Walkthroughs - The most effective means for an AUDITOR to confirm his understanding how internal control over financial reporting is designed and operates to evaluate and test its effectiveness. It includes making inquiries of and observing the personnel who actually perform the controls; reviewing documents that are used in, and that result from, the application of the controls; and comparing supporting documentation to the accounting records. In a walkthrough, the auditor traces a transaction from origination through the company"s information systems to the point where it is reflected in the company"s financial reports.
Walkthroughs provide the auditor with evidence to:
1. Confirm the auditor"s understanding of the process flow of transactions.
2. Confirm the auditor"s understanding of the design of controls identified for all five components of internal control over financial reporting, including those related to the prevention or detection of fraud.
3. Confirm that the auditor"s understanding of the process is complete by determining whether all points in the process at which misstatements related to each relevant financial statement assertion that could occur have been identified.
4. Evaluate the effectiveness of the design of controls.
5. Confirm whether controls have been placed in operation.
Warrant - Option to purchase additional SECURITIES from the issuer.
Wash Sale - A wash sale occurs if stock or securities are sold at a LOSS and the seller acquires substantially identical stock or SECURITIES 30 days before or after the sale. Stock or securities for this purpose includes contracts or operations to acquire or sell stock or securities. Losses incurred in a wash sale cannot be deducted. It does not matter if the total 60 day period begins in one tax year and ends in another. However, the disallowed loss is not permanently lost. Instead, the basis in the newly acquired stock or securities is the same basis as of the stock or securities sold, adjusted by the difference in price of the stock or securities.
Withholding - Amount withheld or deducted from employee salaries by the employer and paid by the employer, for the employee, to the proper authority.
Withholding Allowance - Each taxpayer is allowed to claim a withholding allowance, which exempts a certain amount of wages from being subject to WITHHOLDING. The allowance is designed to prevent too much taxes being withheld from a taxpayers wages and a person can compute this by completing form W-4 and submitting it to their employer.
Working Capital - Excess of CURRENT ASSETS over CURRENT LIABILITIES.
Working Papers - (1) Records kept by the AUDITOR of the procedures applied, the tests performed, the information obtained, and the pertinent conclusions reached in the course of the AUDIT. (2) Any records developed by a CERTIFIED PUBLIC ACCOUNTANT (CPA) during an audit.
Work in Progress - INVENTORY account consisting of partially completed goods awaiting completion and transfer to finished inventory.
Wrap-Around Mortgage - Second MORTGAGE which conveniently expands the total amount of borrowing by the mortgagor without disturbing the original mortgage.
U
Unaudited Financial Statements - FINANCIAL STATEMENTS which have not undergone a detailed AUDIT examination by an independent CERTIFIED PUBLIC ACCOUNTANT (CPA).
Unearned Income - Payments received for services which have not yet been performed.
Uniform Accountancy Act (UAA) - The UAA is the proposal for a new regulatory framework for the public accounting profession which was developed jointly by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA). The new framework is intended to enhance interstate reciprocity and practice across state lines by CPAs, meet the future needs of the profession, respond to the marketplace and protect the public that the profession serves.
Uniform Capitalization Rules - These are a set of rules intended to be a single comprehensive set of rules to govern the capitalization, or inclusion in INVENTORY of direct and indirect cost of producing, acquiring and holding property. Under the rules, taxpayers are required to capitalize the direct costs and an allocable portion of the indirect costs attributable to real and tangible personal property produced or acquired for resale. The obvious effect of the uniform capitalization rules is that taxpayers may not take current deductions for these costs but instead must be recovered through DEPRECIATION or AMORTIZATION.
Unqualified Opinion - AUDIT opinion not qualified for any material scope restrictions nor departures from GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The AUDITOR may issue an unqualified opinion only when there are no identified material weaknesses and when there have been no restrictions on the scope of the auditor"s work. Also known as CLEAN OPINION.
Unrestricted Funds - Resources of a not-for-profit entity that have no restrictions as to use or purpose. (See FUND ACCOUNTING and RESTRICTED FUND.)
Use of Professional Skepticism when Evaluating the Results of Testing - The AUDITOR must conduct the audit of internal control over financial reporting and the audit of the financial statements with professional skepticism, which is an attitude that includes a questioning mind and a critical assessment of audit evidence.
T
Tangible Asset - ASSETS having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process. (See INTANGIBLE ASSETS.)
Tax - Charge levied by a governmental unit on income, consumption, wealth, or other basis.
Tax Court - The U.S. Tax Court is a legislative court functioning to adjudicate controversies between taxpayers and the IRS arising out of deficiencies assessed by the IRS for INCOME, GIFT, ESTATE, windfall profit and certain EXCISE TAXES. It has no jurisdiction over other taxes such as employment taxes. Various sales taxes and certain excise taxes.
Tax Credit for the Elderly and Disabled - Taxpayers age 65 or older or those under 65 who are retired with permanent and total disability are eligible to claim a credit to reduce the amount of their tax liability. It is designed primarily to benefit those individuals who receive small amounts of retirement INCOME. Each taxpayer is allocated an initial base amount based on his or her filing status determining the credit. The base amount is then reduced by the amount of nontaxable income, or is phased out for taxpayers whose ADJUSTED GROSS INCOME exceeds certain levels.
Tax Lien - ENCUMBRANCE placed on property as security for unpaid taxes.
Tax Shelter - Arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.
Tax Year - The period used to compute a taxpayer"s TAXABLE INCOME is tax year. It is an annual period that is either a calendar year , FISCAL YEAR or fractional part of a year for which the return is made.
Taxable Income - Taxable income is generally equal to a taxpayer"s ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.
Taxpayer Identification Number (TIN) - Any individual or other taxable entity that is required to file a return, statement or any other document with the IRS must indicate his (or its) taxpayer identification number. For an individual, the social security number is used, and if you do not have a social security number, the IRS will assign you a TIN. A federal or employer ID number is assigned to other types of entities and will use that as their TIN.
Tenancy-in-Common - Co-ownership of property. In a valid tenancy-in-common, a deceased co-owner"s title passes to his or her heirs without being included in the estate of the deceased co-owner.
Term Loan - Loan for a specified time period.
Timing of Tests of Control - The AUDITOR must perform tests of controls over a period of time that is adequate to determine whether, as of the date specified in management"s report, the controls necessary for achieving the ives of the control criteria are operating effectively.
Total Gain - Excess of the proceeds realized on the sale of either INVENTORY or noninventory goods.
Trade Date - Date when a SECURITY transaction is entered into, to be settled on at a later date. Transactions involving financial instruments are generally accounted for on the trade date.
Transferred Basis - A transferred basis is the basis of property in the hands of a transferor, donor or GRANTOR. In this sense a prior owner"s basis in the property is transferred to the taxpayer. Transferred basis occurs in the following transactions: GIFTS, transfers in trusts, certain transfers to controlled CORPORATIONS, contributions to PARTNERSHIPS and LIQUIDATING distributions from a corporation.
Transferee Liability - A person may be held LIABLE for another taxpayer"s delinquent taxes if:
1. The transferee received assets of the transferor-taxpayer; and
2. The transferor was INSOLVENT at the time or was rendered insolvent by that transfer or related series of transfers.
However the insolvency requirement does not apply to GIFT taxes. The transferee is only liable to the extent of the value of the property received from the transferor. Thus, transferee liability merely provides a means for the IRS to recover any assets the transferor-taxpayer attempts to transfer to avoid paying taxes.
Treasury Bill - Short-term obligation that bears no INTEREST and is sold at a discount.
Treasury Bond - Long-term obligation that matures more than five years from issuance and bears INTEREST.
Treasury Instruments - Direct financial obligations of the
Treasury Note - Intermediate-term obligation that matures one to five years from issuance and bears INTEREST.
Treasury Stock - Stock reacquired by the issuing company. It may be held indefinitely, retired, issued upon exercise of STOCK OPTIONS or resold.
Troubled Debt Restructuring - Agreement between DEBTOR and CREDITOR which amends the terms of a DEBT that has little chance of being paid in accordance with its contractual terms. The agreement may involve the transfer of ASSETS in full or partial satisfaction of the debt.
Trust - Ancient legal practice where one person (the GRANTOR) transfers the legal title to an ASSET, called the principal or corpus, to another person (the TRUSTEE), with specific instructions about how the corpus is to be managed and disposed.
Trustee - Person who is given legal title to, and management authority over, the property placed in a trust.
S
S Corporation - An S Corporation is a corporation which, under the Internal Revenue Code, is generally not subject to federal income taxes. Instead, taxable income of the corporation is passed through to its stockholders in a manner similar to that of a partnership.
Safe Harbor Rule - Concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently, safe harbors are used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation.
Sale-Leaseback Transaction - Sale of property by a seller who simultaneously leases the property back from the purchaser.
Salvage Value - Selling price assigned to retired FIXED ASSETS or merchandise unsalable through usual channels.
SAS - See STATEMENTS ON AUDITING STANDARDS.
SEC - See SECURITIES AND EXCHANGE COMMISSION.
SEC Filings - Financial and informational DISCLOSURES required by the SEC in order to comply with certain sections of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Some of the more common filings that publicly owned companies must submit are the FORM 10-K, FORM 10-Q and FORM 8-K.
SEC Registration Statement - DISCLOSURE document that must be filed with the SEC in connection with a public offering of SECURITIES, unless the offering is exempt.
Securities and Exchange Commission (SEC) - Agency authorized by the United States Congress to regulate the financial reporting practices of most public corporations.
Security - Any kind of transferable certificate of ownership including EQUITY SECURITIES and DEBT SECURITIES.
Securitization -Source of financing whereby an entity"s ASSETS (typically mortgage loans, lease obligations or other types of RECEIVABLES) are placed in a special purpose vehicle that issues SECURITIES collateralized by such assets.
Security Interest - Legal interest of one person in the property of another to assure performance of a second person under a contract.
Self Employment Tax - Most individuals that are in business for themselves, such as SOLE PROPRIETORS, PARTNERS or independent contractor, are subject to self employment taxes. The taxes provide coverage for the self employed individual for social security (OASDI) and Medicare benefits (HI) similar to the taxes withheld by employers from wages it pays the employees.
Settlement Method - Method of ACCOUNTING for SECURITIES whereby transactions are recorded on the date the securities settle by the delivery or receipt of securities and the receipt or payment of cash.
SFAS - See STATEMENT OF FINANCIAL ACCOUNTING STANDARDS.
Short Sale - Sale of an item before it is purchased. A person entering into a short sale believes the price of the item will decline between the date of the short sale and the date he or she must purchase the item to deliver the item under the terms of the short sale.
Short-Term - Current; ordinarily due within one year.
Significant Accounts - An account is significant if there is more than a remote likelihood that the account could contain misstatements that individually or when aggregated with others, could have a material effect on the financial statements, considering the risks of both overstatement and understatement.
Significant Deficiency - Acontrol deficiency or combination of control deficiencies, that adversely affects the company"s ability to initiate, authorize, record, process or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of the company"s annual or interim financial statements that is more than inconsequential will not be prevented or detected.
Significant Findings or Issues - Substantive matters that are important to the procedures performed, evidence obtained, or conclusions reached and include but are not limited to:
1. significant matters
2. results of auditing procedures indicating a need for significant modification of planned auditing procedures
3. audit adjustments
4. disagreements among members of the engagement team
5. circumstances that cause difficulty in applying auditing procedures
6. significant changes in the assessed level of audit risk
7. matters that could result in modification of the AUDITOR"s report
