Page 53 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes 3.5 Keywords

Accounting Entity: This assumes the business to be a separate entity from its owners as well as
other businesses. Moreover, it also stresses on keeping revenue and expense separate from
personal expenses.
AICPA: American Institute of Certified Public Accountants.
FASB: Financial Accounting Standards Board.

GAAP: General Accepted Accounting Principles.
GASB: Governmental Accounting Standards Board.
Going Concern: This assumption presumes that the business will be indefinitely in operation.
This assumption authenticates the methods of amortization, depreciation, and asset capitalization.
However, this assumption is not applicable in the event of liquidation.
Monetary Unit Principle: This assumption presumes an unwavering currency to continue to be
the unit of record.
Time-period Principle: This assumption states that a business enterprise's economic activities
can be divided into simulated time periods.
US GAAP: The Generally Accepted Accounting Principles in the US (US GAAP) refer to the
accounting rules used in United States to organize, present, and report financial statements for
an assortment of entities which include privately held and publicly traded companies, non-
profit organizations, and governments.

US SEC: United States Securities and Exchange Commission.

3.6 Review Questions

1. Explain the meaning and definition of US GAAP.
2. Discuss the difference between IFRS and US GAAP.

3. What is the role of US GAAP in India?
4. Give a short note on Consolidation of subsidiary companies and preoperative expenses.
5. As a part of US GAAP, the financial reporting should provide little information. Explain
that information.
6. In US, the legalistic and litigious nature of the business environment has led to a style of
accounting standards and supporting guidance that is rule-driven. What are those standards
setting followed by US GAAP.
7. What is the necessity and assumptions of US GAAP?
8. Explain the organization behind GAAP.

9. Define the following terms:
(a) Cash flow Statements
(b) Depreciation
(c) Foreign currency transactions
(d) Goodwill

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