Chapter 1 Flashcards
Accounting schemes that distort amounts and disclosures in the financial statements in order to hide financial problems and/or to paint a brighter picture of economic performance. It is synonyms with the term “window dressing”.
Accounting Shenanigans
A situation that exists when the agents of the corporation use their authority for their own benefit and not for the benefit of the principal.
Agency problem
What “agents” and “principal” pertains to?
Agents pertains to corporate managers while Principal pertains to the shareholders of the company.
It is a committee composed of directors tasked to perform oversight of the financial reporting process, selection of the external auditor, and receipt of audit findings from both internal and external auditors.
Audit Committee
The governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and control its properties.
Board of Directors
A system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal, and social obligations toward their stakeholders.
Corporate Governance
A corporation that issues securities such as stocks and bonds to the public.
Corporate Issuer
A measure of financial soundness computed as total liabilities divided by total assets.
Debt Ratio
Are complex financial instruments whose underlying asset is based on energy products such as oil, natural gas, or electricity. Energy derivatives are traded on a formal exchange such as the Chicago Mercantile Exchange.
Energy Derivatives
a process, affected by an entity’s board of directors, management, and other personnel, applied in strategy setting and across the enterprise that is designed to identify potential events that may affect the entity, to manage risks to be within its risk appetite, and to provide reasonable assurance regarding the achievement of entity objectives.
Enterprise Risk Management
a director who has executive responsibility of day-to-day operations of a part or the whole of the organization.
Executive Director
Independent accounting firm that renders a report or opinion on the financial statements of client-companies.
External Auditor
A person who is independent of management and the controlling shareholder, and is free from any business or other relationship which could reasonably be perceived to materially interfere with his/her exercise of independent judgment in carrying out his/her responsibilities as a director.
Independent director
a process affected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.
internal Control
a group of officers given authority by the board of directors to implement the policies it has laid down in the conduct of the business of the corporation.
Management
a director who does not perform any work related to the operations of the corporation.
Nonexecutive Director
the practice of not reflecting an asset and/or a liability on the financial statements.
Off-balance sheet accounting
inter-governmental entity founded in 1961 intended to stimulate economic growth through the formulation of policies for “better lives.”
Organisation for Economic Co-operation and Development (OECD)
a company whose shares of stock are traded in the stock market such as the Philippine Stock Exchange.
Publicly-listed company
a corporate governance regulation passed in the United States requiring the strengthening of corporate governance structures among corporate issuers, stricter regulation of the auditing profession, and assessment of internal controls over financial reporting among others.
Sarbanes-Oxley Act
an entity created for a narrow and specific business objective; for instance, an SPE is created simply for the purpose of obtaining finance.
Special-purpose entity
any individual, organization, or society at large who can either affect and/or be affected by the company’s strategies, policies, business decisions, and operations in general. This includes, among others, customers, creditors, employees, suppliers, investors, as well as the government and community in which it operates.
Stakeholders
states that the corporation exists not only for the benefit of the stockholders but also for the benefit and protection of the other stakeholders such as employees, creditors, suppliers, government, and the society in general.
Stakeholder theory
theory stating that the corporation exists for the benefit of the shareholders or stockholders.
Stockholder Theory
