A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
An audit is an independent check on whether an organisation’s financial statements are a true and fair reflection of the financial condition of that organisation.
Typical activities that auditors carry out include risk analysis, getting to know the client’s business, building relationships with the client and checking items that appear in the financial statements. As a result of audit work suggestions can be made about how the business could improve its controls and business processes.
Simply put, assurance means getting an independent expert to look at something and give their views on its accuracy or quality.
The Big Four
This refers to the four biggest international audit firms. These are, in order of size: PwC, Deloitte, Ernst & Young and KPMG.
The value of an asset as it is entered on a company’s balance sheet.
Business recovery and insolvency
Business recovery experts help to steer the businesses through difficulties, for example by re-organising operations in order to improve cash flow. Insolvency experts guide a business through the insolvency or winding-up process, selling off the business’s assets and paying creditors.
Capital Gains Tax (CGT)
Capital gains tax is payable by an individual taxpayer at a rate equivalent to the taxpayer’s highest rate of income tax on gains arising from the sale of securities or other chargeable assets.
The Chief Financial Officer: the senior official responsible for overseeing the financial activities of a company.
Accountants who work in this field are involved in mergers and the acquisition of companies, assessing the financial health of the target company in order to calculate the value of the company for a potential merger or takeover.
Payment of a company’s profits to its shareholders. Payment can be made in cash, additional stock or property.
Financial accounting involves trying to answer questions such as ‘how do we record the transactions of doing business?’ ‘how do we record sales, purchases, and cash transactions?’ and ‘how much profit did we make and does this match the budgets we produced?’ ‘What do we own and what do we owe to others?’.
The detection and prevention of fraud. Forensic Accounting involves the use of accounting, IT and investigation skills to search for evidence of criminal conduct on behalf of lawyers and insurance companies.
The type of clients varies from large listed corporations and offshore trusts to small partnerships, while on the criminal side, cases can include white-collar crimes and other general offences, such as drug dealing, where a visit to a defendant in prison is not uncommon. Large firms often have specialised departments in litigation support composed of qualified accountants.
Financial Reporting Council. The body responsible for ensuring that financial information from public and large private companies complies with relevant accounting and legal requirements.
Her Majesty’s Revenue & Customs: this is a non-ministerial department of the government that is responsible for collecting taxes.
The tax that is charged on all income as defined by the tax laws. As well as income from employment, income includes dividends, interest, rental income, pension receipts and retirement annuities receipts.
Independent Financial Adviser (IFA)
A financial adviser who is not employed by a single firm and who can therefore select from all companies’ products when providing best advice to their client.
Inheritance Tax (IHT)
The tax that is levied on a person’s estate after their death.
The government department responsible for the administration and collection of tax in the UK.
A situation whereby a business or individual is unable to pay their debts. This may lead to the liquidation of assets in order to pay creditors.
The ‘winding up’ or termination of a business, selling off its assets to discharge its liabilities. Liquidators are people with the responsibility for collecting the assets and settling all of the claims against the company.
Mergers & Acquisitions (M&A)
The merging or combining of two companies. In the case of mergers, two companies come together to form a new company, whilst with an acquisition, one company completely absorbs another. In this way the resulting organisation assumes all rights, stock and liabilities of the merged company. The key incentives for M&As are to gain increased market share and for reasons of economy of scale. Merchant banks and investment banks often have departments responsible for advising firms on M&A.
Medium-sized businesses. In the case of accountancy, firms such as Baker Tilly, BDO, Price Bailey, and Smith & Williamson. As distinguished from The Big Four.
Profit & Loss account. This shows the profits and losses a company makes over time and is used, together with cash flow and other accounting statements, to calculate a total balance by providing a breakdown of costs.
Pay As you Earn – a system whereby employers deduct income tax from their employees’ pay-cheques. This is a requirement in the UK for all earnings above the National Insurance Lower Income Level.
An agreement to restructure an insolvent company before entering the formal insolvency process.
The legal process that takes place after a death. Legal clarification and distribution of a will, settling of debts and taxes.
RDR – Retail Distribution Review
RDR regulations were launched at the end of 2012 with the intention of improving customer confidence in retail investments. Rules require investment advisers to agree charges upfront, hold appropriate professional qualifications and sign up to an ethical code.
RTI – Real Time Information
A new system of reporting PAYE requiring employers and pension providers to tell the government as payments are made, throughout the year rather than annually. Payroll software collects the information and sends it to HMRC online. This will become a legal requirement of all employers by April 2013.
Small and medium enterprises. This refers to companies with up to 250 employees
It is increasingly important for organisations to take more notice of their impact on the environment. Environmental auditing examines how companies can avoid wastage and looks at the costs of setting up environmental controls, such as recycling and minimising energy use.
Tax avoidance and evasion
Tax avoidance means to use tax rules legitimately to pay less tax. Tax avoidance – unlike tax evasion- is perfectly legal, so it is up to the government to change the rules in order for things to change.
An example of tax evasion would be not declaring earnings that you know would be liable for tax; this is illegal.
An example of tax avoidance would be declaring earnings, but using legal instruments to ensure the lowest tax is paid. Examples of this include employing a husband or wife in a small business, or giving money, whether a proportion of wages or profits to charity.
A formal offer or bid; a written contract.
A controversial issue in international tax, transfer pricing refers to the setting of prices between related companies (for example, a parent company and its subsidiary) for goods or services. Transfer mispricing refers to the manipulation of these prices in order to avoid tax.
VFM – Value for Money work
This involves the examination of government programmes in order to recommend improvements.
The process by which a company ceases to exist as a legal entity.
The reduction of the book value of an asset because it’s overvalued compared to the market value, i.e., it is unlikely to be saleable at that price.