Audit & IFRS Glossary

12-month expected credit loss is the portion of lifetime expected credit losses that represents the cash flow…

An Accountant-Administratieconsulent (AA) is a legally protected Dutch professional title under the Wet op het…

An absolute emissions target commits an entity to reducing its total greenhouse gas output by a fixed amount (in…

Acceptance and continuance is the process by which an audit firm evaluates whether to take on a new client…

The group engagement team's right and procedures to review a component auditor's audit documentation under ISA 600…

IAS 8 governs how an entity selects and applies accounting policies, accounts for voluntary and mandatory policy…

An accounting policy disclosure is the note in which an entity describes the material accounting policies it applied…

Accounts payable is the balance sheet liability representing amounts an entity owes to suppliers for goods received…

Accounts receivable are amounts owed to an entity by customers for goods delivered or services performed on credit,…

Accrual accounting is the basis of preparation under IAS 1 that requires an entity to recognise transactions and…

Accrued expenses are liabilities for goods or services an entity has received but not yet been invoiced for at the…

Accrued revenue is income that an entity has earned by delivering goods or satisfying a performance obligation but…

The assertion that amounts and other data relating to recorded transactions and events have been recorded…

An adjusting entry is a journal entry recorded at or after period-end to update account balances for accruals,…

Events after the reporting period that provide evidence of conditions which existed at the end of the reporting…

The most severe form of modified audit opinion, issued when the auditor concludes that misstatements in the…

The Autoriteit Financiële Markten (AFM) is the Dutch financial markets regulator responsible for supervising audit…

The Autoriteit Financiele Markten (AFM) is the Dutch financial markets authority that supervises audit firms…

An AFM inspection is a periodic review by the Autoriteit Financiele Markten of whether an audit firm's quality…

The risk that the aggregate of individually immaterial misstatements across components could be material to the…

An engagement in which a practitioner carries out specific procedures agreed with the engaging party and reports…

The AI Act (Regulation 2024/1689) is the European Union's risk-based law governing artificial intelligence systems,…

The audit steps an auditor performs when an external confirmation request produces no response or cannot be sent,…

The Altman Z-score is a credit-strength formula that combines five weighted financial ratios into a single…

Amortised cost is the measurement basis under IFRS 9 where a financial asset or liability is recorded at its initial…

Audit techniques that evaluate financial information by analysing plausible relationships between financial and…

Automated or IT-dependent procedures built into specific software applications that process transactions, validate…

The arm's length principle requires that transactions between related parties be priced as if the parties were…

A transaction conducted between parties on terms and conditions that independent, unrelated parties would agree to…

The asset turnover ratio measures how efficiently an entity converts its total asset base into revenue, calculated…

An associate is an entity over which an investor has significant influence but not control or joint control,…

An engagement in which a practitioner obtains sufficient appropriate evidence to express a conclusion designed to…

A sampling method used to test the rate of deviation from a prescribed control procedure in a population, where each…

The representations by management, whether explicit or implicit, that are embodied in the financial statements and…

A sub-committee of the board responsible for overseeing the entity's financial reporting process, external audit,…

The record of audit procedures performed, evidence obtained, significant judgments made, and conclusions reached on…

The written agreement between the auditor and management recording the agreed terms of the audit engagement,…

All information the auditor uses to reach the conclusions on which the audit opinion is based, including the…

The detailed document that converts the overall audit strategy into specific procedures for each area of the…

The process of establishing the overall audit strategy and developing a detailed audit plan, designed to reduce…

The narrative document recording the engagement team's understanding of the client, key planning judgments, the…

Audit quality indicators (AQIs) are quantitative and qualitative measures that provide information about factors…

The risk that the auditor expresses an inappropriate opinion when the financial statements contain a material…

A framework expressing audit risk as a function of inherent risk, control risk, and detection risk (AR = IR x CR x…

The application of audit procedures to less than 100% of items within a population, where all sampling units have a…

The high-level document setting scope, timing, direction, and resourcing of an audit engagement, guiding development…

An individual or organisation with expertise in a field other than accounting or auditing, whose work is used by the…

The formal written document in which the auditor expresses an opinion on whether the financial statements are…

Bad debt expense is the charge to profit or loss that reflects the estimated amount of trade receivables a business…

The BaFin is the German federal financial supervisory authority responsible for overseeing banks, insurers,…

A bank reconciliation is the process of matching an entity's cash book balance to the bank statement balance at a…

Basic EPS divides profit attributable to ordinary shareholders by the weighted average shares actually outstanding,…

Base erosion and profit shifting (BEPS) refers to tax-planning strategies that exploit gaps between domestic tax…

The best estimate of expenditure is the amount an entity would rationally pay to settle a present obligation or to…

A Bestätigungsvermerk is the statutory auditor’s opinion on financial statements issued under HGB §322, formatted…

A bill-and-hold arrangement is a contract under which an entity bills a customer for a product but retains physical…

Blockchain audit considerations are the evidence-gathering challenges and risk assessment factors an auditor…

Borrowing costs are interest and other costs an entity incurs in connection with borrowing funds, capitalised as…

A management representation issued by a service organization covering the period between the end of its ISAE 3402 or…

A business combination is a transaction or event in which an acquirer obtains control of one or more businesses,…

BW2 Title 9 (Boek 2, Titel 9 Burgerlijk Wetboek) is the section of the Dutch Civil Code that requires legal entities…

A carbon footprint is the total quantity of greenhouse gas emissions (expressed in tonnes of CO2 equivalent) caused…

Cash basis accounting is a method that records revenue when cash is received and expenses when cash is paid, rather…

The cash conversion cycle (CCC) measures the number of days between an entity paying for inventory and collecting…

A cash flow hedge is a designation under IFRS 9 that defers gains and losses on a hedging instrument in other…

A cash-generating unit is the smallest identifiable group of assets that generates cash inflows largely independent…

CDP is a not-for-profit organisation that runs the world's largest environmental disclosure platform, collecting…

A chart of accounts is the complete, coded list of all general ledger accounts an entity uses to classify and record…

The assertion that transactions, events, account balances, and disclosures have been recorded in the proper accounts…

The amount below which identified misstatements need not be accumulated because they are of a wholly different…

A climate transition plan is a time-bound action plan disclosed under ESRS E1 that explains how an entity will…

A closing entry is a journal entry recorded at the end of an accounting period that transfers the balances of…

Cloud computing audit risks are the risks of material misstatement that arise when an audited entity relies on…

The comparable uncontrolled price (CUP) method tests whether the price charged in a controlled transaction between…

Financial statements presenting an entity's data for the current period alongside at least one prior period,…

Prior period amounts and disclosures included in the current period financial statements for comparison. ISA 710…

An engagement in which a practitioner applies accounting expertise to assist management in preparing financial…

Three levels of service: compilation provides no assurance, review provides limited assurance through inquiry and…

Management's implicit claim that all transactions, account balances, events, and disclosures that should have been…

A distinct business unit, subsidiary, division, or other entity whose financial information is included in the group…

An auditor who performs work on the financial information of a component at the request of the group engagement team…

Component depreciation is the requirement under IAS 16 to depreciate each significant part of a property, plant, and…

The materiality level allocated by the group engagement team to a component for the purpose of planning and…

The probability that the sample result will correctly reflect the true state of the population, expressed as a…

A consignment arrangement is a delivery of goods to another party (the dealer or consignee) where the entity retains…

Consolidation adjustments are the journal entries that eliminate intercompany balances, intercompany transactions,…

The constraint on variable consideration is an IFRS 15 requirement that limits the amount of variable consideration…

A constructive obligation is an obligation that derives from an entity's actions where, by an established pattern of…

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by…

A contingent liability is either a possible obligation arising from past events whose existence will be confirmed…

Continuous auditing is an approach in which the auditor performs audit procedures on an ongoing or near-real-time…

Continuous monitoring is the ongoing evaluation of a firm's system of quality management under ISQM 1 to detect…

A contract asset is an entity's right to consideration in exchange for goods or services that it has transferred to…

A contract liability is an obligation to transfer goods or services to a customer for which the entity has already…

A contract modification under IFRS 15 is a change to the scope or price (or both) of an existing contract with a…

Control exists when an investor has power over an investee, exposure or rights to variable returns from its…

The set of standards, processes, and structures providing the foundation for internal control across the entity,…

The risk that a misstatement in an assertion will not be prevented or detected and corrected on a timely basis by…

A controleverklaring is the statutory auditor's report issued under Standaard 700 of the Dutch NV COS framework,…

Prior period amounts and disclosures presented as an integral part of the current period financial statements,…

COS (Controlestandaarden) are the Dutch auditing standards issued by the NBA as part of the NV COS (Nadere…

The cost approach is one of three valuation techniques under IFRS 13 that estimates fair value by calculating the…

The cost model is one of two measurement bases an entity may elect for property, plant and equipment after initial…

The cost model carries property, plant and equipment at historical cost less accumulated depreciation and impairment…

Country-by-country reporting is the OECD BEPS Action 13 requirement for multinational groups with consolidated…

A credit-impaired financial asset is a financial asset whose estimated future cash flows have been adversely…

The benchmarks a practitioner uses to evaluate or measure subject matter in an assurance engagement, providing the…

The Common Reporting Standard is the OECD's global framework for automatic exchange of financial account information…

Crypto asset accounting is the classification and measurement of cryptocurrency holdings under existing IFRS…

The CSRD is an EU directive (Directive 2022/2464) requiring in-scope European companies to publish sustainability…

A CSRD audit trail is the documented chain of source data, calculation methodologies, assumptions, and sign-offs…

CSRD exemptions and opt-outs are the provisions within Directive 2022/2464 (as amended by the Omnibus I directive)…

The CSRD phased timeline is the staged rollout schedule under Directive 2022/2464 that determines when each category…

The CSRD value chain cap is a set of transitional and permanent limits on the sustainability information a reporting…

Controls that a service organization's system description assumes user entities will implement. The user auditor…

The current ratio measures an entity's short-term liquidity by dividing current assets by current liabilities as…

Current tax is the amount of income tax payable (or recoverable) in respect of the taxable profit (or tax loss) for…

The assertion that transactions and events have been recorded in the correct accounting period, focusing on the…

DAC6 is the EU directive (Council Directive 2018/822) requiring intermediaries and taxpayers to report cross-border…

DAC7 is the EU directive (2021/514) that requires digital platform operators to collect seller data and report it…

The debt-to-equity ratio measures an entity's financial leverage by dividing total liabilities (or total debt) by…

Declining balance depreciation is a method of allocating the cost of a tangible asset over its useful life by…

A decommissioning obligation is a provision recognised for the estimated cost of dismantling, removing, or restoring…

Deferred revenue is a liability recognised under IFRS 15 when an entity receives payment from a customer before…

A deferred tax asset is a balance sheet amount representing future tax savings that arise when an entity has…

A deferred tax liability is the amount of income tax payable in future periods arising from taxable temporary…

The present value of future pension payments an employer owes its employees for service already rendered, measured…

Depreciation is the systematic allocation of the depreciable amount of a tangible asset over its useful life,…

Derecognition of financial assets is the removal of a financial asset from the statement of financial position under…

The risk that the procedures performed by the auditor will not detect a misstatement that exists and that could be…

A modified audit report in which the auditor states that no opinion can be formed on the financial statements…

The discount rate in lease accounting is the interest rate used to calculate the present value of future lease…

DNSH is the principle under EU Taxonomy Regulation 2020/852 requiring that an economic activity claiming substantial…

DORA (EU Regulation 2022/2554) is the EU regulation requiring financial entities to maintain ICT risk management…

Double materiality is the principle under the CSRD and ESRS that requires an entity to report sustainability…

A double taxation agreement (DTA) is a bilateral treaty between two countries that allocates taxing rights over…

Double-entry bookkeeping is the recording method in which every financial transaction produces at least two ledger…

A single audit procedure designed to simultaneously evaluate the operating effectiveness of a control and detect…

Sustainability due diligence is the process under the EU Corporate Sustainability Due Diligence Directive (CSDDD,…

Basic earnings per share is the amount of profit or loss attributable to each ordinary share outstanding during the…

Diluted earnings per share adjusts the basic EPS calculation by assuming that all dilutive potential ordinary shares…

EBITDA (earnings before interest, taxes, depreciation and amortisation) is a non-GAAP measure that removes financing…

The EBITDA margin expresses earnings before interest, tax, depreciation, and amortisation as a percentage of…

The effective interest rate method allocates interest income or expense over the life of a financial instrument by…

EFRAG is a private-public body that provides technical advice to the European Commission on both IFRS endorsement…

EFRAG's financial reporting pillar assesses each new or amended IFRS standard against the EU endorsement criteria…

An additional paragraph in the auditor's report that draws users' attention to a matter already presented or…

An emphasis of matter paragraph draws attention to a matter disclosed in the financial statements. An other matter…

Engagement partner responsibilities are the obligations assigned to the individual partner who takes overall…

An engagement quality review (EQR) is an objective evaluation of the significant judgments made by the engagement…

Controls operating across an organisation rather than within a specific process, including the control environment,…

The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted…

An error is an unintentional misstatement; fraud is an intentional act involving deception to obtain an unjust or…

The European Sustainability Reporting Standards are the mandatory reporting framework under the CSRD that prescribes…

An ESRS datapoint is the smallest discrete unit of information that a reporting entity must disclose (or assess for…

A disclosure requirement is a named reporting obligation within an ESRS topical or cross-cutting standard that…

An ESRS materiality threshold is the quantitative or qualitative cut-off point an entity applies under ESRS 1 to…

An ESRS topical standard (E1 through E5, S1 through S4, G1) prescribes disclosures for a single environmental,…

The EU Taxonomy is the classification system established by Regulation (EU) 2020/852 that defines which economic…

Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the…

Management's implicit claim that assets, liabilities, and equity interests recorded in the financial statements…

A forward-looking impairment model under IFRS 9 that requires entities to recognise credit losses based on expected…

Expected credit loss is the probability-weighted estimate of credit losses on financial assets, measured as the…

The auditor's estimate of the misstatement likely to exist in a population, used alongside tolerable misstatement to…

Exposure at default (EAD) is the total amount a borrower is expected to owe at the moment of default, used under…

An extension option in a lease contract gives the lessee the right to continue using the underlying asset beyond the…

Audit evidence obtained as a direct written response to the auditor from a third party, providing information about…

A misstatement about which there is no doubt: the amount recorded is objectively wrong and the correct amount can be…

Factual misstatements are certain errors. Judgmental misstatements arise from unreasonable estimates or policies.…

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly…

A fair value hedge is an IFRS 9 hedge designation that offsets changes in the fair value of a recognised asset,…

A Level 1 input under IFRS 13 is a quoted price in an active market for an identical asset or liability that the…

A Level 2 input under IFRS 13 is an observable market input other than a Level 1 quoted price, used to measure fair…

A Level 3 input under IFRS 13 is an unobservable input used to measure fair value when no relevant observable market…

Fair value less costs of disposal is the price that would be received to sell an asset in an orderly transaction…

Fair value through other comprehensive income (FVOCI) is the IFRS 9 measurement category where changes in a…

Fair value through profit or loss is the IFRS 9 measurement category where a financial instrument is remeasured to…

FATCA is a US federal law (IRC Sections 1471–1474) that requires foreign financial institutions to identify and…

A finance lease from the lessor's perspective is a lease that transfers substantially all the risks and rewards of…

Under IFRS 16, a lessor classifies each lease as either a finance lease (derecognising the asset and recognising a…

A financial asset is any asset that is cash, an equity instrument of another entity, or a contractual right to…

A financial liability is a contractual obligation to deliver cash or another financial asset to another entity, or…

Financial materiality in sustainability reporting identifies sustainability matters that trigger or could trigger…

Foreign currency translation is the process of expressing in the entity's presentation currency those transactions…

A detailed examination of financial records conducted to detect fraud, quantify financial losses, trace the…

Events or conditions that indicate an incentive or pressure to commit fraud, provide an opportunity, or indicate a…

A framework describing the three conditions typically present when fraud occurs: incentive/pressure, opportunity,…

Fraud is an intentional act resulting in a misstatement; an error is unintentional. The distinction determines the…

The Financial Reporting Council is the UK's independent regulator of auditors, accountants, actuaries, and corporate…

Free cash flow is the cash an entity generates from operations after deducting capital expenditure, derived from the…

Three approaches to component work in a group audit: full-scope audit of the component, specified audit procedures…

The functional currency is the currency of the primary economic environment in which an entity operates, determined…

A general ledger is the principal accounting record that aggregates every financial transaction of an entity into…

The GHG Protocol is a set of internationally recognised standards, developed by the World Resources Institute and…

A GmbH (Gesellschaft mit beschränkter Haftung) becomes subject to statutory audit under HGB §316 when it exceeds the…

The assumption that an entity will continue in operation for the foreseeable future, typically at least twelve…

A modified auditor's report issued when the auditor concludes that the entity cannot continue operating as a going…

Goodwill impairment is the write-down of goodwill recognised in a business combination when the carrying amount of…

A government grant is assistance from a public body in the form of transfers of resources to an entity in return for…

A green bond is a debt instrument whose proceeds are earmarked for environmentally beneficial projects, and the EU…

Greenwashing is the practice of making misleading or unsubstantiated environmental claims about a product, service,…

GRI Standards are a voluntary, globally adopted sustainability reporting framework focused on an organisation's…

Gross profit margin is the percentage of revenue remaining after deducting cost of sales, calculated by dividing…

An audit of group financial statements that involves components, requiring the group engagement team to direct,…

The formal communication from the group engagement team to component auditors detailing the work to be performed,…

The engagement partner responsible for the direction, supervision, and performance of the group audit engagement,…

The partner responsible for the direction, supervision, and performance of the group audit engagement and for the…

The engagement partner, partners, and staff at the group level who establish the overall group audit strategy,…

Hedge accounting is an optional accounting treatment under IFRS 9 that aligns the recognition of gains or losses on…

The Handelsgesetzbuch (HGB) is the German Commercial Code that prescribes bookkeeping, financial reporting, and…

Highest and best use is the use of a non-financial asset by market participants that would maximise the asset's…

The IAASB is the independent standard-setting body within IFAC that develops International Standards on Auditing…

A temporary difference under IAS 12 reverses over time and creates a deferred tax asset or liability, while a…

Value in use measures an asset's worth to the entity through discounted future cash flows, while fair value less…

A provision is a liability recognised on the balance sheet when an outflow of resources is probable and measurable,…

Under IAS 38, research costs are expensed as incurred because the entity cannot yet prove future economic benefit,…

The IASB is the independent standard-setting body of the IFRS Foundation responsible for developing and issuing IFRS…

The IDW (Institut der Wirtschaftsprüfer in Deutschland e.V.) is the voluntary professional body of German public…

IESBA is the independent standard-setting body under IFAC that develops the International Code of Ethics for…

IFAC is the global organisation for the accountancy profession, supporting the development of international…

Control under IFRS 10 requires the investor to have power over the investee, exposure to variable returns, and a…

Under IFRS 15, over-time recognition spreads revenue across the period of performance when one of three criteria in…

Under IFRS 16, a lessee recognises a right-of-use asset and a lease liability on the balance sheet for virtually…

The acquisition method under IFRS 3 requires an acquirer to measure the acquiree's identifiable assets and…

IFRS 9 requires an entity to classify every financial asset into one of three measurement categories (amortised…

The IFRS 9 simplified approach measures expected credit losses (ECL) at lifetime ECL from day one, skipping the…

The IFRS for SMEs Accounting Standard is a self-contained framework (fewer than 330 pages) that simplifies…

The IFRS Foundation is the not-for-profit public interest organisation that oversees the IASB and ISSB, responsible…

IAS standards were issued by the International Accounting Standards Committee (IASC) between 1973 and 2001, while…

Impact materiality is one half of the double materiality assessment under the CSRD, requiring an entity to identify…

Impairment of assets occurs when an asset's carrying amount exceeds its recoverable amount, requiring the entity to…

The income approach is a valuation technique under IFRS 13 that converts future amounts (cash flows or earnings)…

The Income Inclusion Rule (IIR) is the primary charging mechanism under the OECD Pillar Two GloBE framework,…

The incremental borrowing rate (IBR) is the rate of interest a lessee would have to pay to borrow, over a similar…

The susceptibility of an assertion to a misstatement that could be material, before considering any related…

Inherent risk is the susceptibility of an assertion to misstatement before controls. Control risk is the risk that…

The liabilities an insurer recognises for its obligations under insurance contracts, measured using either the…

An intangible asset is an identifiable non-monetary asset without physical substance that an entity controls and…

An intercompany elimination is the removal, during consolidation, of transactions, balances, income, and expenses…

The interest coverage ratio measures how many times an entity's operating profit covers its interest expense,…

The auditor's evaluation of whether the client's controls are properly designed and implemented, and where reliance…

An internally generated intangible asset is a non-monetary asset without physical substance that an entity creates…

International Standards on Auditing are the authoritative requirements issued by the IAASB that govern how auditors…

The International Standards on Auditing (ISAs) are the authoritative requirements issued by the IAASB that govern…

Inventory turnover measures how many times an entity sells and replaces its inventory during a period, calculated by…

An IRO assessment is the structured process under the European Sustainability Reporting Standards by which an entity…

ISA 240 (Revised) introduces expanded requirements for fraud risk identification and response, reflecting evolving…

ISA 315 (Revised 2019) replaced the original with a more structured risk identification and assessment framework,…

ISA 570 (Revised 2024) overhauls the auditor's going concern responsibilities by requiring a dedicated going concern…

The ISA Clarity Project was a five-year initiative (2004 to 2009) by the IAASB that restructured all 36…

The international standard governing how a service auditor examines and reports on controls at a service…

ISAE 3402 is the international standard for service organization reports. SOC 1 is the US equivalent under AT-C 320.…

ISQM 1 requires every audit firm to design, implement, and operate a quality management system with defined quality…

ISQC 1 required audit firms to maintain policies and procedures for quality control, while its replacement, ISQM 1,…

ISSA 5000 is the IAASB's stand-alone international standard governing assurance engagements on sustainability…

Policies and procedures governing an entity's IT environment that support the reliable functioning of application…

The jaarrekening is the annual financial statements that every Dutch BV, NV, cooperative, and mutual guarantee…

The Jahresabschluss is the set of annual financial statements that every German corporation must prepare under HGB…

Joint control is the contractually agreed sharing of control over an arrangement, existing only when decisions about…

A joint operation is a joint arrangement under IFRS 11 in which the parties that share joint control have rights to…

A joint venture is a joint arrangement in which two or more parties that share joint control have rights to the net…

A joint venture gives its parties rights to the net assets of the arrangement and is accounted for under the equity…

A journal entry is the formal record of a financial transaction in an entity's accounting system, debiting one or…

The mandatory audit procedure under ISA 240.32(a) requiring the auditor to test the appropriateness of journal…

A misstatement arising when the auditor concludes that management's judgment about an accounting estimate, policy…

The matters that, in the auditor's professional judgment, were of most significance in the audit of the current…

Key audit matters (ISA 701) communicate the most significant matters in the audit. Emphasis of matter paragraphs…

A lease incentive is any payment or reimbursement made by a lessor to a lessee (or any cost borne by the lessor on…

A lease liability is the obligation of a lessee to make lease payments, measured at the present value of the lease…

A lease modification is a change in the scope of a lease or the consideration for a lease that was not part of the…

The lease term under IFRS 16 is the non-cancellable period of a lease plus any periods covered by an extension…

A legal obligation is a present obligation that derives from a contract, legislation, or other operation of law,…

Lifetime expected credit loss (lifetime ECL) is the total credit loss an entity expects on a financial instrument…

The level of assurance obtained when the practitioner reduces engagement risk to an acceptable level that is higher…

Limited assurance on sustainability information is an engagement in which a practitioner performs less extensive…

A limited assurance engagement on sustainability is an engagement in which the practitioner performs less extensive…

Location-based emissions reflect the average carbon intensity of the electricity grid where energy is consumed,…

Loss given default (LGD) is the share of a financial asset's exposure that the holder expects to lose if the…

A low-value asset exemption under IFRS 16 allows a lessee to recognise lease payments for assets with an individual…

The person(s) with executive responsibility for conducting the entity's operations, as defined in ISA 200.13(m). In…

The ability of management to manipulate accounting records or prepare fraudulent financial statements by bypassing…

An individual or organisation with expertise in a field other than accounting or auditing, whose work is used by the…

The market approach is a valuation technique that uses prices and other relevant information generated by market…

A master file provides tax authorities with a high-level overview of a multinational group's global business…

The matching principle requires an entity to recognise expenses in the same period as the revenues they help…

Material uncertainty related to going concern exists when events or conditions may cast significant doubt on the…

The threshold above which misstatements (individually or in aggregate) could reasonably influence users' economic…

Materiality is the principle under the IFRS Conceptual Framework and IAS 1 that information is material if omitting…

Materiality is the threshold for the audit opinion. Performance materiality is the lower amount set to reduce the…

Minimum safeguards are the social and governance due diligence procedures that an entity must have in place before…

A difference between the amount, classification, presentation, or disclosure of a reported financial statement item…

Any opinion other than unmodified, issued when the auditor concludes that the financial statements contain a…

A statistical sampling method in which each individual monetary unit in a population has an equal chance of…

Monitoring and remediation is the component of a firm's system of quality management under ISQM 1 that provides…

The entity's own process for evaluating whether internal control components are present and functioning over time,…

Monetary unit sampling selects individual currency units and weights toward high-value items. Classical variables…

The NBA (Koninklijke Nederlandse Beroepsorganisatie van Accountants) is the public-law professional body that…

A confirmation request that asks the confirming party to respond to the auditor only if the party disagrees with the…

A net investment hedge is an IFRS 9 hedge designation that protects the parent entity's interest in a foreign…

Net profit margin is the percentage of revenue that remains as profit after all expenses, calculated by dividing net…

The NIS2 Directive (Directive (EU) 2022/2555) is the EU's updated cybersecurity law requiring essential and…

Events after the reporting period that are indicative of conditions which arose after the end of the reporting…

A non-controlling interest is the portion of equity in a subsidiary that is not attributable, directly or…

The risk that the auditor reaches an incorrect conclusion for any reason not related to sampling, including using…

An audit sampling approach in which the auditor does not use probability theory to measure sampling risk or evaluate…

Notes to the financial statements are the structured disclosures that accompany the primary financial statements,…

Observable inputs are market-based data points that reflect the assumptions market participants would use when…

The assertion that transactions and events recorded in the financial statements actually took place during the…

An onerous contract is a contract in which the unavoidable costs of meeting the obligations exceed the economic…

An OOB (Organisatie van Openbaar Belang) is a Dutch designation for entities whose statutory audit is subject to…

The operating cash flow ratio divides cash generated from operating activities by current liabilities, measuring…

An operating lease from the lessor's perspective is a lease under IFRS 16 that does not transfer substantially all…

An operating segment is a component of an entity that earns revenue and incurs expenses, whose operating results the…

Other comprehensive income is the portion of total comprehensive income under IAS 1 that captures gains and losses…

Financial or non-financial information included in an entity's annual report beyond the audited financial statements…

An additional paragraph in the auditor's report that communicates a matter not presented or disclosed in the…

A parent entity is an entity that controls one or more other entities (subsidiaries) and is therefore required to…

Payable days (days payable outstanding) measures the average number of days an entity takes to pay its trade…

The PCAOB is the US public body established by the Sarbanes-Oxley Act of 2002 that oversees the audits of public…

The amount set by the auditor below overall materiality to reduce the probability that uncorrected and undetected…

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service (or a…

A permanent difference is an item of income or expense that is recognised in accounting profit but will never be…

A permanent establishment is a fixed place of business through which an enterprise carries on its activity in…

Pillar Two is the OECD's global anti-base erosion framework that imposes a 15% minimum effective tax rate on…

A confirmation request that asks the confirming party to respond directly to the auditor in all cases, either by…

A positive confirmation requires a response in all cases. A negative confirmation requests a response only if the…

The professional responsible for performing an assurance engagement and issuing the assurance report under ISAE…

Prepaid expenses are assets recognised when an entity pays for goods or services before receiving them, representing…

A present obligation is a duty to transfer economic resources that exists at the reporting date as a result of a…

The set of assertions the auditor uses when evaluating whether financial information is correctly presented and…

The presentation currency is the currency in which the financial statements are presented, which may differ from the…

A principal controls a good or service before transferring it to the customer and recognises revenue at the gross…

Probability of default is the likelihood that a borrower or counterparty will fail to meet its contractual payment…

The attitude ISA 200 requires auditors to maintain throughout every engagement: a questioning mind paired with…

The auditor's best estimate of the total misstatement in a population, calculated by extrapolating errors found in a…

Proportionate consolidation is a method of accounting for interests in jointly controlled entities under the former…

A provision is a liability of uncertain timing or amount, recognised when an entity has a present obligation from a…

A provision matrix is a simplified approach under IFRS 9 that allows an entity to measure the loss allowance for…

A Prüfungsbericht is the long-form audit report that the statutory auditor (Wirtschaftsprüfer) must prepare under…

A Qualified Domestic Minimum Top-up Tax (QDMTT) is a domestic top-up levy that brings the effective tax rate of…

A type of modified audit opinion issued when the auditor concludes that misstatements are material but not…

A qualified opinion uses 'except for' language when misstatements are material but not pervasive. An adverse opinion…

Quality objectives are the outcomes an audit firm must achieve through its system of quality management under ISQM…

Quality responses are the policies and procedures a firm designs and implements under ISQM 1 to address identified…

Quality risks are the conditions, events, circumstances, actions, or inactions within a firm's system of quality…

The quick ratio (also called the acid-test ratio) measures whether an entity can cover its short-term obligations…

A Registeraccountant (RA) is a legally protected Dutch professional title under the Wet op het accountantsberoep…

The level of assurance obtained when the practitioner reduces engagement risk to an acceptably low level, expressed…

Reasonable assurance in sustainability reporting is the higher of two assurance levels under ISSA 5000, requiring…

Reasonable assurance provides a high level of assurance expressed positively. Limited assurance provides a…

Receivable days (days sales outstanding, DSO) measures the average number of days an entity takes to collect cash…

Recoverable amount is the higher of an asset's fair value less costs of disposal and its value in use, serving as…

A person or entity that has control, joint control, or significant influence over the reporting entity (or vice…

Research costs are expensed as incurred because the activity cannot yet demonstrate a future economic benefit, while…

Residual value is the estimated amount an entity expects to receive from disposing of a non-financial asset at the…

A residual value guarantee is a commitment made to a lessor ensuring that the value of an underlying asset at the…

A restructuring provision is a provision recognised under IAS 37 for the estimated costs of a programme that…

Return on assets (ROA) measures how efficiently an entity generates profit from its total asset base, calculated as…

Return on equity (ROE) measures how much net profit an entity generates relative to its shareholders' equity,…

Return on invested capital (ROIC) measures how effectively an entity converts its debt and equity funding into…

The revaluation model is an accounting policy under IAS 16 (and IAS 38 where an active market exists) that measures…

Revenue recognition at a point in time occurs when an entity transfers control of a promised good or service to the…

The rebuttable presumption under ISA 240 that the auditor must treat revenue recognition as a significant risk of…

Revenue recognition over time is the pattern under IFRS 15 in which an entity recognises revenue progressively as it…

The revenue recognition principle requires an entity to recognise revenue when (or as) it satisfies a performance…

A limited assurance engagement in which a practitioner performs inquiry and analytical procedures to conclude…

An audit provides reasonable assurance through extensive procedures and a positive opinion. A review provides…

A right of return is a contractual or customary entitlement allowing a customer to send back a product for a refund…

A right-of-use asset represents a lessee's right to use an underlying asset for the lease term, measured at cost…

The assertion that the entity holds or controls the rights to assets reported on the balance sheet and has genuinely…

The audit procedures performed to obtain an understanding of the entity and its environment and to identify…

The risk that the financial statements contain a material misstatement before the audit is performed. The…

The Raad voor de Jaarverslaggeving (RJ) is the independent Dutch Accounting Standards Board that publishes the…

Root cause analysis in audit quality is the process of investigating why a deficiency occurred within a firm's…

A sale and leaseback is a transaction in which an entity sells an asset and immediately leases it back from the…

The process of calculating how many items an auditor must test from a population to draw a reliable conclusion about…

The risk that the auditor's conclusion based on testing a sample differs from the conclusion that would be reached…

SASB standards identify financially material sustainability topics across 77 industries for investor…

SBR is the Dutch national standard for structuring and transmitting financial data electronically to the KVK, the…

Science-based targets are greenhouse gas emission reduction targets that a company sets in line with the level of…

Scope 1 emissions are direct greenhouse gas (GHG) emissions from sources an entity owns or controls, including fuel…

Scope 2 emissions are indirect greenhouse gas emissions from the generation of purchased or acquired electricity,…

Scope 3 emissions are the indirect greenhouse gas emissions that occur across a reporting entity's upstream and…

The process by which the group engagement team determines the nature, timing, and extent of work to be performed on…

Sector-specific ESRS were the planned second layer of European Sustainability Reporting Standards designed to…

Segment reporting under IFRS 8 requires entities whose debt or equity instruments are publicly traded to disclose…

An entity that provides services to user entities where those services form part of the user entity's information…

The short-term lease exemption under IFRS 16 allows a lessee to exclude leases with a remaining term of 12 months or…

A component classified as individually financially significant to the group under the pre-revision ISA 600. Replaced…

A significant increase in credit risk (SICR) is the IFRS 9 trigger that moves a financial asset from Stage 1…

Significant influence is the power to participate in the financial and operating policy decisions of an investee…

An identified risk of material misstatement for which inherent risk is close to the upper end of the spectrum,…

An engagement to form an opinion on one financial statement or a specific element of a financial statement, rather…

An assurance report on controls at a service organization issued under the AICPA's SSAE 18, covering controls…

SOC 1 covers financial reporting controls (equivalent to ISAE 3402). SOC 2 covers Trust Services Criteria (security,…

An assurance report on controls at a service organization addressing the AICPA Trust Services Criteria (security,…

Financial statements prepared under a framework designed for specific users rather than the general public, such as…

A materiality level lower than overall materiality, set for particular classes of transactions, account balances, or…

The SPPI test is the IFRS 9 assessment that determines whether the contractual cash flows of a financial asset…

Staging is the IFRS 9 mechanism that assigns every financial asset measured at amortised cost (or at fair value…

Stakeholder engagement is the structured process by which an undertaking consults affected parties and users of…

The stand-alone selling price is the price at which an entity would sell a promised good or service separately to a…

The StaRUG (Unternehmensstabilisierungs- und -restrukturierungsgesetz) is the German pre-insolvency law that lets…

The statement of cash flows presents an entity's cash inflows and outflows during a period, classified into…

The statement of changes in equity is the primary financial statement that reconciles each component of equity from…

The statement of comprehensive income is the financial statement that presents an entity's profit or loss together…

The statement of financial position is the primary financial statement that reports an entity's assets, liabilities,…

The statement of profit or loss is the primary financial statement that presents an entity's income and expenses for…

A sampling approach in which every item in the population has a known, non-zero probability of selection, and the…

Statistical sampling uses probability theory to select items and evaluate results, measuring sampling risk…

A stichting (Dutch foundation) that operates an enterprise becomes subject to statutory audit requirements under BW2…

Straight-line depreciation allocates the depreciable amount of an asset evenly over its useful life, producing a…

The process of dividing a population into sub-populations (strata) that share common characteristics, so that the…

The outcome of measuring or evaluating the underlying subject matter against applicable criteria. In an audit, it is…

Events that occur between the date of the financial statements and the date of the auditor's report. ISA 560…

A service organization used by another service organization to perform services that are part of the information…

A subsidiary is an entity controlled by another entity (the parent), where control means the parent has power over…

Audit procedures designed to detect material misstatements at the assertion level, consisting of tests of details…

The quantity and quality of evidence the auditor needs before concluding on each assertion and signing the opinion,…

Condensed financial statements derived from an entity's audited annual financial statements, prepared to inform…

The schedule where the auditor accumulates all misstatements identified during the audit that management has not…

Sustainability assurance is an assurance engagement performed on sustainability information reported by an entity,…

Sustainability due diligence under the CSDDD (Directive 2024/1760) is the legally mandated process by which in-scope…

A sustainability reporting boundary is the perimeter of entities and value chain relationships that a reporting…

A sustainability statement is the dedicated section of an entity's management report that discloses material…

The tax base of an asset or liability is the amount attributed to that item for tax purposes under IAS 12, and the…

A taxonomy-aligned activity is an economic activity that satisfies all four conditions under Article 3 of the EU…

A taxonomy-eligible activity is an economic activity listed in the delegated acts of the EU Taxonomy Regulation…

The TCFD was a Financial Stability Board initiative that established a four-pillar framework (governance, strategy,…

A temporary difference is the difference between the carrying amount of an asset or liability in the statement of…

A termination option in a lease gives the lessee (or, less commonly, the lessor) the right to end the lease before…

The agreed conditions under which an audit is performed, covering objective, scope, auditor and management…

Audit procedures that evaluate whether a client's internal controls operated effectively during the period under…

Tests of controls evaluate whether internal controls operated effectively. Substantive procedures detect material…

Substantive audit procedures applied to individual transactions, account balances, or disclosures to detect material…

Tests of details examine individual items for misstatements. Substantive analytical procedures evaluate…

The person(s) or organisation(s) with responsibility for overseeing the entity's strategic direction and…

The monetary amount set by the auditor for a specific sampling application, representing the maximum misstatement in…

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for…

Transfer pricing refers to the rules and methods for pricing transactions between related parties (especially within…

Transfer pricing documentation is the set of records that a multinational group prepares to demonstrate that its…

Transition risk arises from the shift to a low-carbon economy (policy changes, technology disruption, market…

A trial balance is a listing of all general ledger account balances at a specific date, organised into debit and…

A service auditor's report under ISAE 3402 covering the description of a service organization's system and the…

A Type I report covers control design at a point in time. A Type II report covers both design and operating…

A service auditor's report under ISAE 3402 covering design and operating effectiveness of controls at a service…

An uncertain tax position is a tax treatment where there is uncertainty over whether the relevant tax authority will…

The process by which the auditor obtains sufficient knowledge of the client's business, industry, regulation, and…

The Undertaxed Profits Rule is the backstop mechanism within the OECD's Pillar Two framework that allows a…

Units of production depreciation allocates the depreciable amount of an asset based on actual output or usage rather…

The auditor's conclusion that the financial statements are free from material misstatement and comply with the…

Unobservable inputs are assumptions about how market participants would price an asset or liability when no…

Useful life is the period over which an entity expects to consume the economic benefits of an asset, or the number…

An organization that uses the services of a service organization where those services are part of the user entity's…

Management's claim that assets, liabilities, and equity interests are recorded at appropriate amounts and that any…

A value chain in sustainability reporting is the full range of upstream and downstream business relationships…

Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating…

Variable consideration is any portion of the transaction price in a contract with a customer that depends on the…

Variable lease payments are amounts owed by a lessee that change after the commencement date because they depend on…

A statistical sampling method that estimates the total monetary misstatement or the total audited value of a…

A procedure that traces a single transaction from initiation through the entity's information system to its…

A Wirtschaftsprüfer is a German public auditor licensed under the Wirtschaftsprüferordnung (WPO) to perform…

Withholding tax is a levy deducted at source by a payer (or the payer's jurisdiction) on cross-border payments such…

Working capital is the difference between an entity's current assets and current liabilities, measuring short-term…

The Wirtschaftsprüferkammer (WPK) is the German public-law chamber that registers all Wirtschaftsprüfer and audit…

Formal statements obtained from management confirming their responsibilities and the completeness of information…

The Wet toezicht accountantsorganisaties (Wta) is the Dutch law that governs the licensing, quality requirements,…

The Wwft is the Dutch anti-money laundering and counter-terrorist financing act that requires designated gatekeepers…