Absolute quality conformance A type of conformance that requires all products or services to meet a target value exactly, with

no variation. Absolute risk The risk derived from the environment without the mitigating effects of internal controls. Absorption costing A method of inventory costing in which all variable and fixed manufacturing costs are included as inventoriable costs; thus inventory "absorbs" all manufacturing costs. Absorption model A transfer pricing model that starts with the seller's variable cost for an item and then allocates fixed costs to the prices. Acceptable risk A type of risk that revolves around the business impact that would be experienced if certain risks were realized. Acceptable risk level A risk level derived from an organization's legal and regulatory compliance responsibilities, its threat profile, and its business drivers and impacts. Account A record of transactions that fit within a specific category. Accounting rate of return (ARR) method A capital budgeting method that measures the return on a project in terms of net operating income. Accounts payable turnover ratio A financial ratio that includes all outstanding obligations a company owes its creditors. Accrual basis accounting An accounting system that records transactions as they occur, recognizing revenue when earned and expenses when incurred, regardless of when the cash is actually paid. Accruals Either accrued revenues, which are earned revenues yet to be received as cash or recorded, or accrued expenses, which are incurred but unpaid expenses yet to be recorded. Accrued expenses Unpaid expenses that accrue as a liability until paid, including salaries, rents, etc. Accumulation costing systems Costing systems that accumulate costs and assign them to a particular cost object such as a product or service. Active control A type of control that prevents or detects a deviation from the approved procedure. Active listening Concentration on the words and messages of others. Activity Any type of action, work, or movement performed within an entity. Activity center A logical grouping of activities, actions, movements, or sequences of work. Activity chart A project scheduling technique that divides a project into sequential activities with estimated start and completion times. Activity cost driver A measurement of the amount of an activity used by a cost object.

Activity-based costing (ABC) A method of assigning costs to products, services, and customers based on the consumption of resources caused by activities. Actual costing system A cost measurement system that records the actual costs incurred for direct materials, direct labor, and overhead (by allocating actual amounts). Actual costs The historical costs paid for goods or services. Ad valorem tax Any tax for which the tax base is the value of a good, service, or property. Added-value negotiating A cooperative negotiation approach based on shared interests and objectives; focus is on presenting exchanges of value for each party. Adequate control A level of control that is present if management has planned and organized in a manner that provides reasonable assurance that the organization's risks have been managed effectively and that the organization's goals and objectives will be achieved efficiently and economically. Adjunct account An account that increases an asset, liability, or equity account, for example, premium on bonds payable. Allocation Assigning costs to a cost object. Allocation base Any factor that has a cause-and-effect relationship with costs, such as a rise in sales volume that affects a rise in sales commissions. Analytical auditing A type of review that examines relationships among information. Analytical review A type of review that examines relationships among information. Annuity A security that requires periodic payments in equal amounts per equal length periods and in which the interest is compounded over the same interval. Application control An IT control related to the specific functioning of an application system that supports a specific business process. Application gateway/proxy server A type of firewall that serves as an intermediary for communications between the external world and private internal servers; intercepts external packets and, after inspection, relays a version of the information, called a proxy, to the private server, and vice versa. Application proxy filtering A type of firewall that serves as an intermediary for communications between the external world and private internal servers; intercepts external packets and, after inspection, relays a version of the information, called a proxy, to the private server, and vice versa. Arbitrage A method of theoretically making a risk-free profit from the price differences between markets through the simultaneous purchase of an investment in one market and sale in another. Arbitrage pricing theory A theory that states that multiple factors (rather than just one factor, beta) affect a security's return, such as unexpected earnings announcements or a change in interest rates.

Arbitration A process in which the parties in a dispute agree in advance that they will abide by the decision of an arbitrator who is chosen to hear both sides and make a judgment. Assets Resources obtained or controlled by an organization as a result of past transactions or events that will probably result in future economic benefits to the organization. Assignable cause A nonrandom cause of variability. Assurance services Objective examination of evidence for the purpose of providing an independent assessment on risk management, control, or governance processes for an organization. Attributes In a database, fields relating to entities. Attribution The way we interpret verbal or nonverbal messages by our own references. Automated clearing house (ACH) A method of electronic funds transfer that sends payments in batches. Balance sheet A financial statement that shows what an organization owns and owes and where the money for the ownership originated. Balanced scorecard (BSC) A strategic measurement and management system that links long-term strategic planning objectives with day-to-day activities; measures financial performance, customer knowledge, internal business processes, and learning and growth. Bank reconciliation A schedule to explain any differences between a bank statement and cash on the books. Bankers' acceptance (BA) A negotiable security used for import or export, created when a bank accepts payment responsibility for a letter of credit. Batch processing A type of processing that accumulates data changes until a set time and then releases them to the database. Behaviorally anchored rating scale (BARS) appraisal method An appraisal method that indicates examples of desirable and undesirable behavior and then associates the examples with different performance levels. Bell curve The graph of a normal distribution of random variables in a population; perfectly symmetrical, with the mean, median, and mode lying at the same central point, most values clustered near that midpoint, and a decreasing number occurring at greater distances from the midpoint. Benchmarking The comparison of an organization or project to similar internal or external organizations or projects. Best evidence A type of evidence that is generally documentary; original writing is required when available. Bit A binary digit; the item that is lowest in the database hierarchy.

Block diagram A pictorial representation of a process or activity, typically including a series of boxes and connecting lines to indicate association and direction/order. Bond indenture A promise to pay a sum of cash at a set maturity rate plus a specific rate of periodic interest on the face value. Bonds payable Debt that can be raised from multiple lenders; the most common type of long-term liability on the balance sheet. Bottleneck A limiting factor, barrier, or constraint that slows down a product's total cycle time. Brainstorming An activity in which a group generates new ideas; ideas are accepted without criticism and are then evaluated together. Break-even point The output level at which total revenues and total costs are equal. Break-even pricing A pricing method that determines the number of units that must be sold at a set price to cover all fixed and variable costs. Bridge Networking hardware that connects two or more LANs with similar architectures. Bus network A network topology that has a main line (bus); all devices are connected to the line. Business combination A type of merger in which operations of two or more organizations are brought under common control. Business continuity planning A system of internal controls for managing the availability of computer and other resources and data after a processing disruption. Business cycle A regular pattern of expansion (recovery) and contraction (recession) in the level of economic activity. Business process reengineering (BPR) A fundamental rethinking of business processes in order to achieve improvements in cost, quality, service, and speed. Business-to-business (B2B) e-commerce Any direct link between businesses and the use of online business marketplaces, such as EDI or online catalogs. Business-to-consumer (B2C) e-commerce Marketing and selling products to customers online. Business-to-employee (B2E) e-commerce An online tool set for employees. C chart A control chart that tracks the variability of attributes (values that can be counted, such as errors) in successive samples. Callable bonds Bonds that the issuer can call and retire before maturity, such as during periods of high interest rates. Cap Sets a maximum value for an adjustable interest rate.

Capacity The maximum rate of output generated by a process. Capital

The accumulated resources of an organization raised through debt and equity financing and through the organization's productive efforts.

Capital gains tax Tax levied on the profit released upon the sale of a capital asset. Capital stock The par value of issued shares of stock. Cash basis accounting An accounting system in which an organization recognizes revenue only when cash is received and expenses only when cash is paid out. Cash flow hedge A hedge of the exposure to variable cash flows of a forecasted transaction. Category rating A performance appraisal method that requires the appraiser to mark an employee's level of performance on a specific form. Causal forecasting methods Forecasting methods based on the assumption that the variable being forecast exhibits a cause-and-effect relationship with one or more other variables. Cause-and-effect diagram A quality tool that uses a visual to map out a list of factors that are thought to affect a problem or a desired outcome. Centralized structure An organizational structure in which there are several levels of authority, a long chain of command, and a narrower span of control. Certificates of deposit (CDs) Bank-issued time deposits for large sums with a fixed maturity; can be negotiable or nonnegotiable. Certification The systematic measurement of characteristics such as education and experience that results in recognition of an individual as one who meets the suggested knowledge and other minimum requirements for a position or a profession. Chain of command The line of authority in an organization. Change management The continuous process of planning and directing changes that occur within an organization to achieve an intended result. Channel stuffing The practice of inflating sales figures by forcing more products through a distribution channel than the channel can actually sell. Character Any alphanumeric key; the item that is second-lowest in the database hierarchy. Charter In terms of the internal audit activity, a formal written document that defines the activity's purpose, authority, and responsibility.

Check digits A type of control in which an extra digit is added that has an algorithmic relationship to the remaining digits to show if the number was incorrectly entered such as by transposition. Check sheet A simple visual tool used to collect and analyze data. Chief audit executive (CAE) The top position in an organization responsible for internal audit activities. Circumstantial evidence A type of evidence that proves an intermediate fact from which a primary fact can be logically inferred. Client/server architecture A network architecture that uses servers for specialized functions; clients (the recipients of these functions) are PCs that send requests to the servers. Closing The process of reducing all temporary or nominal accounts to zero so they are ready to be used in the next period. Cluster organization An organizational structure with many groups or teams to accomplish organizational objectives. Coaching In the organizational setting, refers to specific advising for new learning and improved work performance. Code of Ethics Principles relevant to the profession and practice of internal auditing and Rules of Conduct that describe behavior expected of internal auditors. Coefficient of variance A measure of the size of variability in relation to the size of the mean; calculated by dividing the standard deviation by the mean. Collar Sets both a maximum and a minimum value for an adjustable interest rate, with one end protecting the buyer and the other end the seller. Commercial paper (CP) Unsecured promissory notes issued by nonfinancial corporations and bank holding companies. Common cause A random cause of variability in a sample. Common stock The default classification for an organization's public shares granting a portion of ownership. Common-size financial statements Financial statements that express all account balances as percentages of one relevant aggregate balance. Communication A two-way transfer of information between a sender and a receiver; can be verbal, written, or nonverbal. Communication style The way a person prefers to express himself or herself. Communities of practice Groups of individuals that form around topics of interest for the purpose of learning and innovation in an organization. Comparability The use of similar standards and techniques across organizations so that users can differentiate real similarities and differences from those caused by divergent accounting rules.

Comparative advantage Situation in which a party's opportunity cost for producing a good or service, in comparison to that of other goods and services it can apply its resources toward, is lower than the opportunity cost for other parties. Comparative methods Performance appraisal methods in which the appraiser directly compares the performance of each employee with that of others. Compensating balances Minimum balance requirements set by banks as partial compensation for their services. Compensating controls Controls that compensate for the lack of an expected control; for example, close supervisory review may compensate for a lack of segregation of duties where a small staff size makes proper segregation impractical. Competition-based pricing A pricing approach that takes competitors' prices into account. Competitive advantage The advantage that one organization has over competitors in realizing above-average financial performance. Competitive intelligence The data gathered about current and potential competitors. Compliance The conformity and adherence to policies, plans, procedures, laws, regulations, contracts, or other requirements. Computer network The sum of all infrastructure and applications required to connect two or more network nodes (computers and devices). Computer-integrated manufacturing (CIM) A manufacturing system that completely integrates all factory and office functions within an organization throughout the life cycle of a product or service. Concentrated industry An industry with stronger and larger leaders that give it market focus. Confiscation Situation in which a country takes over the assets of an organization. Conflict When parties disagree over substantive issues or when emotional antagonisms prevail and result in friction between parties. Conflict of interest Any relationship that is or appears to be not in the best interest of the organization; would prejudice an individual's ability to perform his or her duties and responsibilities objectively. Conflict resolution A situation in which the underlying reasons for a conflict are eliminated. Conformance Reducing and eliminating variations (defects) from a desired outcome (the target value). Conservatism Prudence and adequate consideration of the risks and uncertainty in business situations when presented with situations that require judgment. Consortium network A computer network formed by a group of organizations to assist in intercommunications.

Constructive conflict A type of conflict that leads to beneficial results; can transform the ways in which individuals interact and improve the quality of conflict outcomes. Consulting services Advisory and related client service activities, the nature and scope of which are agreed with the client and which are intended to add value and improve an organization's governance, risk management, and control processes without the internal auditor assuming management responsibility. Consumer price index (CPI) A measure of the collective changes in the cost of living for the average consumer household. Contingencies Existing situations or circumstances with an uncertain potential for gain or loss; tied to certain future events that may or may not occur. Contingency planning A system of internal controls for managing the availability of computer and other resources and data after a processing disruption. Contingent liabilities Liabilities that satisfy two criteria: the amount of the loss can be estimated reasonably, and all available information implies that it is probable a liability will exist on or before the financial statement date. Continuing professional development The means by which members of a profession maintain, improve, and broaden the knowledge, skills, and competence required in their professional lives. Contra account A type of account that reduces an asset, liability, or equity account, such as discount on bonds payable. Contract An agreement between parties, with terms and conditions that describe the agreement and constitute a legal obligation. Contract manufacturing A licensing agreement whereby an organization manufactures for a foreign market. Contribution margin The amount remaining from sales revenue after variable expenses are deducted. Control Any action taken by management, the board, and other parties to manage risk and increase the likelihood that established objectives and goals will be achieved. Control chart A statistical process that illustrates variations from normal in a situation over time. Control deficiency A condition that warrants attention as a potential or real shortcoming that leaves the organization excessively at risk. Control environment The attitude and actions of the board and management regarding the significance of control within the organization; provides the discipline and structure for the achievement of the primary objectives of the system of internal control. Control framework A recognized system of concepts encompassing all elements of internal control. Control processes The policies, procedures, and activities that are part of a control framework, designed to ensure that risks are contained within the risk tolerances established by the risk management process.

Control self-assessment A variety of assessment techniques, including facilitated workshops and surveys, in which the assessment is performed by people involved in the area or process being assessed rather than by an independent party. Cookies Files intended to be accessible only by the creator that are used to store data about a user's preferences. Copyright Government protection granted to authors and artists of all types. Corporate values An organization's standards of behavior. Corrective controls IT controls that are used once errors, fraud, or other control issues have been detected. Corroborative evidence A type of evidence that supplements evidence already given and tends to support it. Cost Any resource that must be given up to obtain some objective. Cost driver Any factor that has a cause-and-effect relationship with costs, such as a rise in sales volume that affects a rise in sales commissions. Cost leadership A competitive strategy in which an organization will minimize development, advertising, and other costs in order to offer products and services at a lower cost than competitors. Cost object Any object that can have a cost applied to it and can be used to determine how much a particular thing or activity costs. Cost of goods sold budget A budget that includes the total and per unit production cost for a period. Cost recovery method A revenue deferral method that defers all profit recognition until cash collections exceed cost of goods sold. Cost reimbursement contract A type of contract that allows for payment of all incurred costs within a predetermined ceiling that can be allocated to the contract, are allowable within cost standards, and are reasonable. Cost-based pricing A pricing approach that uses the average product or service cost as the base and then adds a percentage to cover additional costs and provide a profit. Cost-plus pricing A pricing method that uses an accurate analysis of cost per unit as a basis for calculating the selling price for a product or service; a margin representing a minimally accepted return on investment is added to the cost to set the price. Cost-push inflation An increase in production costs that reduces supply and increases prices. Cost-volume-profit (CVP) analysis Type of analysis that helps managers understand the interrelationships among cost, volume, and profit by focusing on the interactions among prices of products, volume or level of activity, per unit variable costs, total fixed costs, and mix of products sold. Counterparty risk The risk that the other party to a transaction will not fulfill their obligations; includes settlement risk and credit risk.

Countertrade An in-kind trade made between parties, typically through a trading organization. Critical path method (CPM) A project management tool used to schedule, organize, and coordinate tasks within a project. Cultural intelligence The ability to understand and communicate effectively across cultures. Culture The values and norms that exist in an organization. Cumulative average-time learning model A learning curve analysis model that calculates cumulative total time by multiplying the incremental unit by the cumulative average time per unit. Current assets Cash and cash equivalents and assets held for sale or expected to be realized in the current operating cycle or within one year of the balance sheet date. Cyclical unemployment A type of unemployment caused by ups and downs in the business cycle, specifically by a lack of demand for labor. Data cleansing The removal of redundancies and errors in a database. Data definition language Describes the data and the relationships between data in a database, including logical access paths and records. Data dictionary A master record concerning the data in a database. Data items In a database, the specific data in fields. Data manipulation language A language that has commands for viewing or changing a database. Data mining The capability of sifting through and analyzing large volumes of data to find certain patterns or associations. Data query language A user-friendly method of querying a database for information. Data terminal An input/output node for a mainframe system, consisting of either just a display and entry devices or a PC running terminal emulation software. Data warehouse Database designed to collect the information from one or more transactional databases for purposes of multiyear storage of records and reporting. Database Any repository of data in a computer system. Database management system (DBMS) An application that links users and programs to a database and allows the database to be manipulated by multiple applications. Days' sales outstanding A measure of a company's effectiveness in collecting accounts receivable; a smaller number indicates greater effectiveness in managing and collecting money from customers.

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Debenture bonds Bonds that have no collateral (are unsecured). Debt ratio The ratio of all an organization's debts to all of its assets; provides a general measure of ability to repay creditors. Debt to equity ratio A ratio that measures an organization's ability to cover long-term liabilities from owners' equity. Decentralized structure An organizational structure in which there are fewer levels of authority, a shorter chain of command, and a wider span of control. Decision support systems (DSS) A broad category of software systems designed not to make decisions but to enhance information available to management in making decisions. Decision usefulness The selection of aggregation levels and accounting and presentation methods that will provide information that will be most useful for decision-makers. Declining industry An industry in which the demand for products or services is diminishing. Decoding The process of interpreting the meaning of a message. Default risk The risk that a lender will not recoup the interest and/or principal when payments on debt become due. Defined benefit plan A type of pension plan in which the employer promises a specific level of benefits starting at retirement. Defined contribution plan A type of pension plan that defines the required annual contribution to the plan but makes no guarantee of the ultimate benefit level paid. Delphi method A forecasting model that attempts to develop forecasts through group consensus. Demand-pull inflation An increase in aggregate demand that pulls up the price level. Demand-side policies Attempt to eliminate or reduce the severity of recessions, or maintain growth at a noninflationary pace, through active fiscal and monetary policy. Demonstrative evidence Evidence in the form of a representation of an object, such as photos, x-rays, movies, maps, etc., that clarifies a witness's testimony and that is substantially similar to the "real" object at issue in the case. Departmental production report A report that tracks the number of units moving through a department, provides a computation of unit costs, and shows how costs were charged to that department. Departmentalization An organizational structure for grouping work into specialized units and jobs. Depreciable base An asset's original cost less its salvage value. Depreciation A method of allocating the cost of tangible assets over the periods of expected use.

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Derivative instruments Contracts requiring one party to pay another party some amount based on an underlying price or value. Descriptive statistics The branch of statistics concerned with collecting, analyzing, describing, and presenting data, for example, mean, median, mode, range, variance, standard deviation. Destructive conflict Type of conflict that erodes relationships and derails progress toward goals. Detective control A type of control that is reactive and that detects undesirable events that have occurred. Development (1) The use of research to develop new processes and products or significantly improve existing ones; (2) the process of employees gaining new capabilities that are useful for both present and future jobs. Differential costs The difference in costs between any two alternatives. Differentiation A competitive strategy in which an organization strives to make its products or services different and unique in the industry. Digital evidence Evidence in the form of e-mail messages, digital photographs, word-processing documents, spreadsheets, and databases. Digital signature Uses public key encryption and a hashing algorithm (information about the transmitted data) to prevent an original message from being reconstructed. Direct costing A method of inventory costing in which all variable manufacturing costs are included as inventoriable costs except for fixed manufacturing costs, which are treated as costs of the period in which they are incurred. Direct costs Any costs that can be easily and accurately traced to a cost object (usually direct labor and direct materials). Direct evidence A type of evidence that proves a fact without requiring presumptions or interference, for example, testimony of an eyewitness to a fraud. Direct financing lease A type of lease in which the lessee uses the lease to finance the purchase of an asset. Direct labor budget A type of budget that can help an organization plan production processes to smooth out production and keep a consistent workforce size throughout the year. Direct materials budget A type of budget that determines the required materials and the quality level of the materials used to meet production. Direct materials purchase budget A type of budget that is concerned with direct purchases of material components and finished goods. Direct materials usage budget A type of budget that specifies the material components and the cost of the materials in the direct materials budget. Directive control A type of control that is proactive and that causes or encourages a desirable event to occur; examples include guidelines, training programs, incentive plans.

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Discount rate The interest rate on loans that the Federal Reserve makes to commercial banks. Distribution The area concerned with how a product or service reaches the customer. Distribution channel The medium used to reach a customer. Diversity Accepting and respecting individual differences and being inclusive of such things as different backgrounds, values, beliefs, experiences, and skills. Divest To sell off business units early in the decline stage by finding interested buyers. Dividend growth model A method of estimating the stock value of constantly growing dividends that assumes that the dividend will grow at a constant rate g, based either on historical growth rates or on an analyst's forecasts. Divisional structure Organizational structure in which divisions are fairly autonomous units. Documentary evidence Type of evidence that includes all kinds of writings, including those that are handwritten, typed, printed, photocopied, or photographed, as well as any media by which information can be preserved. Dollar unit discovery sampling (DUDS) A method of discovery sampling in which a variable is added to the definition of the sample by weighting items by their size. Domain name A plain language label referring to a numeric IP address. Domain name system (DNS) A hierarchical server network that maintains the domain names for conversion to IP addresses. Domestication The situation in which a host county acquires more ownership of a foreign business. Dual-entry accounting An accounting system in which each transaction is recorded in at least two places: a debit to one account and a credit to another account. Due care The level of caution that an individual exercises when performing a due diligence audit and reporting the results. Due diligence The process of investigating a person, business, or financial transaction. Dumb terminal An input/output node for a mainframe system, consisting of either just a display and entry devices or a PC running terminal emulation software. Dumping

Situation in which an exporter sells a product for less in a foreign country than the product sells for in the domestic market; designed to drive competitors out of an industry and then allow the exporter to raise its prices to make a profit.

Duplicate process check A hardware control in which a process is done twice and compared.

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Dysfunctional conflict Type of conflict that erodes relationships and derails progress toward goals. E-commerce Conducting commercial activities over the Internet. Earnings per share The ratio of total earnings to number of shares outstanding; a commonly used measure of a company's value to investors. Echo check A hardware control in which received data is returned to the sender for comparison. Economic entity Any entity that has separately identifiable accounting and accountability; could be an individual, type of corporation, or business unit. Economic exposure The risk that fluctuations in exchange rates will affect the future cash flows or value of an organization. Economic growth An increase in real gross domestic product over a period of time. Economic indicator Any economic statistic, such as the unemployment rate, GDP, or the inflation rate, that indicates how well the economy is doing and how well it will do in the future. Economic order quantity (EOQ) inventory model A model useful in evaluating the efficiency of organizations that have substantial inventory. Economic value added (EVA) Determined by deducting the weighted average cost of capital from after-tax net income plus interest expense. Edit check A type of control that involves automated tests on data fields. Effectiveness Relates to outputs and the degree to which an organization's goals and objectives are achieved. Efficiency Minimizing the use of resources in a product or service process as compared to standard expectations; the ratio of the resources actually used to the resources that were planned to be used. Electronic data interchange (EDI) An intercompany communication directly between applications in standard format. Electronic evidence Evidence in the form of e-mail messages, digital photographs, word-processing documents, spreadsheets, and databases. Electronic funds transfer (EFT) The transfer of monetary value and financial data from one bank to another. Emerging industry An industry in the early stages of development. Encoding Creating a message in the best sensory mode (such as seeing or hearing) and the best tone, format, length, etc. Encryption Use of a mathematical algorithm to scramble data so that it cannot be unscrambled without a numeric key code.

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Engagement A specific internal audit assignment, task, or review activity, such as an internal audit, control self-assessment review, fraud examination, or consultancy. Engagement objectives Broad statements developed by internal auditors that define intended engagement accomplishments. Engagement work program A document that lists the procedures to be followed during an engagement, designed to achieve the engagement plan. Enterprise application integration (EAI) A portfolio of technologies that help disparate applications communicate. Enterprise resource planning (ERP) systems Modular suites of business applications that share data between modules seamlessly and store all data in a single repository. Enterprise risk management (ERM) A structured, consistent, and continuous process across the whole organization for identifying, assessing, deciding on responses to, and reporting on opportunities and threats that affect the achievement of its objectives. Entity In a database, a record that relates to a person, place, or thing. Environmental analysis A process for analyzing external and internal factors that are important to setting and carrying out strategy. Environmental scanning A process for analyzing external and internal factors that are important to setting and carrying out strategy. Equipment check Circuitry controls that detect hardware errors. Equity (shareholders' equity or net assets) The residual ownership interest in an organization's assets after deducting all of its liabilities. Equivalent unit (EU) A measure of work done on partially completed units expressed in terms of how many completed units could have been created with the same amount of work in the period under consideration. Ethnocentric orientation In terms of international operations, an orientation in which the home country headquarters largely controls home country and host country operations. European Central Bank (ECB) The bank that is responsible for monetary policy covering the 13 member countries of the European Union that have adopted the euro as their currency. European Commission (EC) The executive body of the European Union. European Investment Bank (EIB) The European Union's financing institution; provides financing for capital investment furthering European Union policy objectives. European System of Central Banks (ESCB) The banking system that is made up of the European Central Bank and the local central banks of the 27 member states of the European Union. European Union (EU) A customs and economic union of 27 (as of January 2007) independent, democratic European countries (called member states) supporting free trade and fixed exchange rates.

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Event An incident or occurrence resulting from internal or external sources that affects the implementation of strategy or achievement of objectives. Evidence The information presented to a judge or jury that is designed to convince them of the truth or falsity of statements. Exchange rate risk The volatility of exchange rates between an organization's primary currency and any currencies used by its subsidiaries and trading partners. Exchange-traded securities Securities traded on an organized exchange with standardized contracts. Excise tax A specific cash amount levied on a particular commodity, such as liquor. Expenses Depletion or outflows of assets and/or incurrence of liabilities resulting from an organization's production or delivery of goods or services as part of its primary ongoing operations. Experimental evidence A type of evidence that is the result of an experiment conducted outside or inside the court under circumstances similar to those giving rise to the issue in the case. Expert judgment A forecasting method used when conditions in the past are not likely to hold in the future; involves a group of experts, each considering information and then weighing in with an opinion or conclusion regarding a specific forecast. Expert systems Software systems that capture the knowledge of a professional using a series of decision points; used to automate complex situations requiring judgment, such as the probability of loan default. Exponential smoothing A smoothing method that uses a weighted average of past time series as the forecast; selects only one weight, that of the most recent observation. Export subsidies Payments a government makes to a business that exports goods; the firm will export the good up to the point at which the domestic price exceeds the foreign price by the amount of the subsidy. Exporting When an organization sells its products or services to foreign customers, either directly or indirectly through an intermediary. Expropriation The situation in which a country takes over an organization's assets without adequate compensation. Extensible markup language (XML) A language used for Internet applications; it is accessible by any type of computer platform, allows new tags to be defined, has interactive elements, and eases interapplication communication. External analysis A research process that gathers information on the external environment that might affect the industry and organization, such as factors related to the economy, government, laws and regulations, societal and cultural concerns, and technology, as well as specific industry or competitor trends. Extranet A network that is similar to an intranet but is designed for customers, external partners, or suppliers. Face value The amount of a bond owed at maturity.

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Factory budget A type of budget that includes all production costs other than direct materials and direct labor. Fair market value The amount an asset could be acquired for (or sold) or a liability incurred (or settled), assuming willing parties that are not involved in a liquidation. Fair value The amount an asset could be acquired for (or sold) or a liability incurred (or settled), assuming willing parties that are not involved in a liquidation. Fair value hedge A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. Fault-tolerant components Components that have redundancies in hardware or software to allow continued operations if a system fails. Federal Reserve System (the Fed) The central banking system of the US; uses monetary policy to help the economy achieve full-employment GDP. Fedwire A secure and expensive type of electronic funds transfer; operated by Federal Reserve System. Field In a database, a business object such as a name or an asset. Field check A type of control that involves a check to see if information in an entry field is complete. File In a database, a collection of related records. File Transfer Protocol (FTP) Allows transfer of large files between computers on a network or the Internet. Financial Accounting Standards Board (FASB) An independent, nonprofit group under authority of the US Securities and Exchange Commission that sets accounting standards. Financial electronic data interchange (FEDI) Type of electronic data interchange that transfers payment information between companies, banks, or others; settlement occurs through EFT. Financial flexibility The ability of an organization to respond to unexpected opportunities by changing amounts and timing of cash flows. Financial instruments Cash, ownership interests, and rights or obligations set by contract to receive or remit cash or other financial instruments. Financial leverage The use of fixed interest in the form of debt or preferred equity stock with the expectation of earning a greater return than the cost of the fixed interest. Financing lease Any lease that transfers substantially all of the risks and rewards of owning an asset, whether title is or is not eventually transferred. Finished goods Products that are ready-to-wear, ready-to-eat, ready-to-drive, or ready-to-use and are waiting to be purchased.

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Firewall A hardware/software combination that routes all communications to or from the outside world through it, blocking unauthorized traffic. First mortgage bonds Bonds secured by real estate. First-in, first-out (FIFO) inventory valuation method An accounting assumption that the oldest goods are used or sold first; calculates the unit cost using only the costs incurred and work performed during the current accounting period. Fiscal policy A government's use of taxes and spending to achieve its macroeconomic goals. Fishbone diagram A quality tool that uses a visual to map out a list of factors that are thought to affect a problem or a desired outcome. Fixed asset turnover ratio A measure of how efficiently a company uses its fixed assets to generate sales; the higher the ratio, the better. Fixed costs Portions of the total cost that remain constant regardless of changes in the level of activity over the relevant range. Fixed exchange rate A rate of exchange for currency that does not rise or fall. Fixed payment coverage ratio A measure of an organization's ability to pay fixed obligations within a set period of time. Fixed price contract A type of contract that requires a contractor to successfully perform the contract and deliver supplies or services for a price agreed to up front. Flexible exchange rate A system in which the exchange rates for currencies are determined by market supply and demand as are the prices of other financial assets such as stocks and bonds. Floating exchange rate A system in which the exchange rates for currencies are determined by market supply and demand as are the prices of other financial assets such as stocks and bonds. Floor Sets a minimum value for an adjustable interest rate. Flowchart A graphical representation of the actual or ideal path followed by any service or product; provides a visual sequence of the steps in a process, illustrates the relationship between parts, and identifies what the process does or should do. Focus A competitive strategy in which an organization appeals to a narrower segment of the industry. Follow-up A process by which internal auditors determine the adequacy, effectiveness, and timeliness of actions taken by management on reported engagement observations and recommendations, including those made by external auditors and others. Force field analysis A planning tool to identify forces for and against change to help make better decisions. Forecasting Analyzing past and present data in order to project the future.

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Foreign currency exposure hedge A hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. Foreign direct investment (FDI) A situation in which an international organization owns part or all of an operation in another country. Forensic auditing The application of auditing skills to gather evidence that may be used in a court of law for a criminal or civil matter. Format check A type of control that checks to see that data is entered in an acceptable format. Forward An over-the-counter contract between a buyer and a seller who agree today on a price and delivery date for the future. Forward exchange contract An agreement to buy foreign currency in the future at a price determined by the forward market, often as a fair value hedge against the cash flow variability from changes in exchange rates. Forward-type contracts Binding contracts that fix the price of an asset in advance and give the buyer the risks of asset ownership at a fraction of the asset's cost; usually settled in cash prior to the settlement date. Fragmented industry An industry made up of a number of smaller competitors with no strong market leader. Franchising A type of license whereby use of an entire business is licensed. Fraud Any illegal acts characterized by deceit, concealment, or violation of trust. Fraud risk The probability that fraud will occur and the potential severity or consequences to the organization when it occurs. Fraudulent financial reporting Falsified reporting designed to mislead financial statement users, usually by understating or overstating assets/liabilities or revenues/expenses. Free trade The absence of artificial barriers to trade among different nations. Frictional unemployment The amount of unemployment due to the normal workings of the labor market. Full cost model A transfer pricing model that starts with the seller's variable cost for an item and then allocates fixed costs to the prices. Full costing A method of inventory costing in which all variable and fixed manufacturing costs are included as inventoriable costs; thus inventory "absorbs" all manufacturing costs. Full disclosure principle A principle that recognizes that statement preparers must make compromises between a level of detail sufficient to help users with their decisions while condensing that information enough to keep it understandable. Functional currency The currency of a subsidiary's primary economic environment.

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Functional group A group that is established to accomplish a specific ongoing purpose and remains in existence. Functional structure An organizational structure in which authority and decision-making are arranged by functional groups such as finance, marketing, manufacturing, and research. Future value The value of an investment at a particular date in the future assuming that compound interest is applied. Futures Forwards traded on an established exchange or its clearinghouse. FX rates Quotations of the number of units of one currency needed to exchange for a unit of a different currency. Gains Increases in net assets (equity) due to incidental or peripheral transactions except those resulting from investments by or distributions to owners. Gap analysis A type of analysis that looks at the gap between the organization and benchmark competitor that has the best quality in the industry. Gateway Networking hardware that connects networks with dissimilar architectures. Gateway firewall A type of firewall that stops traffic flowing to a specific application such as File Transfer Protocol. General Agreement on Tariffs and Trade (GATT) An agreement that sets forth binding tariffs between member countries; generally means that the countries cannot raise their tariffs from the agreed-upon levels. General control An IT control that applies generally to the IT environment or overall mix of systems, networks, data, people, and processes. General ledger The primary ledger for an organization, containing all asset, liability, equity, revenue, and expense accounts. Generally Accepted Accounting Principles (GAAP) The broad guidelines and specific procedures for accounting that have substantial authoritative support in the business community. Geocentric orientation In terms of international operations, an orientation in which there is strong interdependence between the home and host countries; the approach is to develop worldwide standards and objectives that serve both universal and local purposes. Global industry An industry in which products or services are similarly created and distributed for markets in more than one country. Global strategy A strategy in which an organization can produce products or services anywhere from a global location. Goalpost conformance Conformance to a quality specification expressed as a specified range around a target. Goodwill The excess of the price paid for a subsidiary over the fair value of the subsidiary's net assets.

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Governance The combination of processes and structures implemented by the board in order to inform, direct, manage and monitor the activities of the organization toward the achievement of its objectives. Governance controls Oversight IT controls (rather than performance controls) that rest with the board of directors and their committees, such as the audit committee, in consultation with executives. Government bonds Bonds issued by government entities; repaid either through general tax revenues (general obligation bonds) or through revenues of the item financed (revenue bonds). Gross domestic product (GDP) The total market value of all goods and services produced in the economy in one year. Gross profit The money remaining from sales revenues after deductions for the cost of goods sold. Gross profit margin The ratio of gross profit to sales. Group dynamics The way groups and individuals act and react. Groupthink A situation in which members of a group make decisions without considering a range of alternatives and perspectives. Harvest

To maximize cash flow while minimizing or ceasing investments.

Hedger The party in a derivative transaction who is attempting to reduce an underlying business risk (usually loss of profitability). High-context language When individuals say things indirectly and implicitly; reading between the lines is important because the words could have different meanings and some things may be left unsaid. Histogram A measurement of the frequency of particular elements contributing to an overall set of data. Historical cost The principle that using the values actually paid or received is more reliable than estimates of current value. Holding gains/losses The net change in the fair value of a security from one period to the next. Home country The country where an organization's headquarters are. Horizontal analysis A type of analysis used to review historical sequences of data; more appropriately used in reviewing data from income statements or expense statements rather than balance sheets, which present financial information for a particular point in time. Horizontal bar chart A project scheduling technique that divides a project into sequential activities with estimated start and completion times. Horizontal common-size financial statements Statements that express the results for the same organization over several periods as a percentage of a base year, with other years shown as the percentage increase or decrease from the base year.

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Horizontal integration A lateral approach to owning and gaining control of activities at a same level of the value chain. Host country A foreign country that an organization conducts business in. Host IPS (HIPS) Software that functions at the operating system kernel level to detect and block abnormal application behavior before it executes. HTTP/HTTPS (Hypertext Transfer Protocol/Secure HTTP) Regular and encrypted versions of the communications standard for Internet message formatting and transmission. Hub In terms of networking hardware, a port switching communications device. Hybrid instruments A combination of traditional debt or equity financing with an embedded derivative, such as a convertible bond or convertible preferred stock. Identity theft The illegal use of sensitive information to impersonate an individual over computer networks in order to defraud the person or commit a crime without the perpetrator's true identity being known. If-converted method A method of determining the impact of convertible bonds that assumes that all convertibles are converted at the beginning of the period or at their date of issuance (prorated). Import quotas The maximum amount of a good that may be imported to a country in a given time period. Importing When an organization buys products, supplies, or services from a foreign country. Imprest accounts Accounts that are restricted as to what cash in the account can be used for, such as for clearing large amounts of checks or for specific disbursements such as payroll, dividends, or travel expenses. Income bonds Bonds that pay interest only when the organization has profits. Income statement A summary of the profitability or success of an organization over a period of time, such as a year. Incremental budgeting A type of budget in which a manager starts with last year's figures and adds to them (or subtracts from them) according to anticipated needs. Incremental costs The difference in costs between any two alternatives. Incremental unit-time learning model A learning curve analysis model that measures increased efficiency by adding the incremental time for each unit to the previous total time; average time per unit is then calculated by dividing total time by the number of units. Indirect costs Any costs that are related to a cost object but cannot be easily and accurately traced to the product (such as overhead). Industrial revenue bonds Bonds issued by tax-exempt state or local governments to finance public projects.

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Inferential statistics The branch of statistics concerned with drawing inferences about a population from samples selected from the population. Inflation The decrease in the purchasing power of money and the increase in the general price level for goods and services. Informal groups Groups that develop on their own, without a formal decision by management; may form spontaneously in response to a function or task or from a sense of shared experiences or interests. Information risk The risk that inaccurate information is used to make a business decision. Inherent limitations Limitations of risk management, control, and governance related to human judgment, resource limitations, and the need to balance the costs of controls in relation to expected benefits. Inherent risk The risk derived from the environment without the mitigating effects of internal controls. Input controls A type of control intended to prevent computer errors by controlling data as it manually or electronically enters the system. Inquiry log A type of control that tracks all read-only access to records. Installment sales method A revenue deferral method that recognizes revenue as cash is collected from prior sales; used for sales on installment where title for the goods is held until the final payment is collected. Intangibles Assets that have no physical substance; exclude financial instruments by definition. Integration A growth strategy used by many organizations to control aspects of product or service development or customer buying processes. Interest The agreed-upon payment for use of resources. Internal analysis A research process that collects information on an organization's resources, capabilities, structure, limitations, etc. Internal audit activity A department, division, team of consultants, or other practitioner(s) that provide independent, objective assurance and consulting services designed to add value and improve an organization's operations. Internal audit criteria The benchmarks against which the subject matter of an engagement can be assessed. Internal auditing An independent, objective assurance and consulting activity designed to add value and improve an organization's operations; brings a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Internal control A process designed to provide reasonable assurance regarding the achievement of objectives in the categories of effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.

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Internal control questionnaire (ICQ) A preconstructed array of questions used to elicit key information about internal control. Internal rate of return (IRR) The rate of return promised by an investment project over its useful life; takes into account the opportunity cost of projects as well as the time value of money. Internalization Being able to conduct transactions within a firm; facilitates transfer of technology from one branch of the company to another without selling the technology. International Accounting Standards Committee (IASC) An independent private-sector body formed from the accountancy bodies of numerous countries. International cooperative alliance A situation in which the organizations in a strategic alliance make an agreement but do not form a separate entity. International financial reporting standards (IFRS) A set of standards used as the basis for many countries' national accounting requirements. International joint venture (IJV) Situation in which the organizations in a strategic alliance form a separate entity. International Monetary Fund (IMF) An international agency charged with promoting economic stability and preventing global depression by providing loans to usually stable countries during times of crisis. International strategy A strategy in which an organization's home country controls the value chain at home but still produces and markets global products. Internet A network of networks that have devoted a portion of their processing power and data to public use. Internet backbone A series of high-capacity trunk lines owned and operated by network service providers (e.g., long-distance telephone companies or governments). Internet protocol (IP) address Numeric address for a specific computer located on the Internet, e.g., 128.6.13.42. Internet service provider (ISP) An organization that provides connection to the Internet via a TCP/IP (Transmission Control Protocol/Internet Protocol) connection or provides network services (IP network). Inventoriable costs Those costs associated with the manufacture of goods or the provision of services. Inventory management The management area that focuses on reducing the costs of holding and transporting inventory without sacrificing customer service. Inventory turnover A measure of the number of times during the year that inventory is replaced; a higher number indicates greater efficiency. Ishikawa diagram A quality tool that uses a visual to map out a list of factors that are thought to affect a problem or a desired outcome. ISO 9000, 10000, 14000 series Sets of quality control standards developed by the International Organization for Standardization.

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Job analysis A process that identifies the activities and responsibilities of a job, its relative importance and relationship to other jobs, the personnel qualifications necessary to perform the job, and the conditions under which the work is performed. Job costing A costing system that assigns costs to a specific job (a distinct unit, batch, or lot of a product or service). Job design The way a job and its tasks are organized; includes what the tasks are, in what order they are done, and how they are done. Job enlargement Broadening the scope of a job with an expansion of similar or different tasks. Job enrichment Adding more depth to a job by adding responsibilities. Job rotation A method of job enlargement where employees move between different tasks and jobs. Job specifications A document that lists the knowledge, skills, and abilities (KSAs) necessary to perform a job satisfactorily. Job-order costing A costing system that assigns costs to a specific job (a distinct unit, batch, or lot of a product or service). Joint ventures Agreements between two separate organizations to accomplish a single project together. Just-in-time (JIT) manufacturing A comprehensive manufacturing production and inventory control methodology in which materials arrive exactly as they are needed for each stage of the production process. Kaizen budget A budgeting method that incorporates continuous improvement by focusing on planned future operating processes rather than current operating practices. Key field In a database, the field used to identify an entity, such as employee number. Keystroke verification A type of control that requires data to be entered twice, by different persons if possible, and highlights any differences. Knowledge management The way an organization identifies and manages its intellectual capital for learning. Last-in, first-out (LIFO) inventory valuation method An accounting assumption that the newest purchases are used or sold first; ending inventory consists of the oldest purchases, including purchases possibly made years ago, so this method undervalues held inventory, assuming inflation. Lateral thinking An innovative thinking process to challenge the status quo and generate unconventional alternatives. Lead time When a scheduled task begins before its predecessor task is completed. Leader A person who influences others to accomplish organizational goals and objectives.

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Leadership skills Skills that relate to imparting the vision and mission of an organization, setting strategy and direction, ensuring the overall financial stability of the organization, minimizing organizational risk, and inspiring others to achieve the goals. Lease Contract that provides a lessee (the renter) less than total interest in a property or good owned by the lessor (the lender of the item). Letters of credit (L/Cs) Bank-issued documents that guarantee payment of an amount given that specified conditions are met. Leveraged leases Direct financing leases where there is an intermediary between the lessor and the lessee (long-term creditor). Licensing An agreement between an organization and another party to, for example, use a technology or a patent. Life-cycle costing A cost management method that considers the entire cost life cycle of a product or service. Line of credit An account that specifies a maximum amount that can be borrowed; the recipient can borrow and repay repeatedly, paying interest only on the actual amount borrowed. Liquidating dividends Dividends that are paid as a return of the stockholders' investment rather than from retained earnings (e.g., a liquidation). Liquidity

An organization's ability to pay its current and future obligations efficiently and on time without undue hardship.

Local-area network (LAN) A type of computer network for a limited geographical area such as a building. Logistics network A global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. Long-term liabilities Any liabilities not qualifying as current. Low-context language When individuals say things very directly and explicitly; the meaning is in the words they use and the specific situation is not as important to discern. Lower control limit The value that is farthest from the mean in the negative direction but still within the range that represents statistical control. Lower of cost or market (LCM) An inventory valuation method in which cost is the original cost and market refers to the market-determined cost to reproduce or replace the item, the lower of which becomes the new value. Lump sum contract A type of contract that requires a contractor to successfully perform the contract and deliver supplies or services for a price agreed to up front. Macroeconomics The science of economic concerns on a national level. Mainframe computer A large computer capable of supporting massive inputs and outputs and many concurrent users.

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Maintenance/repair/operations (MRO) supplies Those supplies required for repairs and maintenance of machinery, computers, etc. Managed floating exchange rate system A system in which the currency rate normally fluctuates according to supply and demand but is also supported by currency interventions by central banks in order to stabilize or alter rates. Managed risk The risk remaining after management takes action to reduce the impact and likelihood of an adverse event, including control activities in responding to a risk. Management by objectives (MBO) appraisal method An appraisal method that encourages employees to help set objectives for themselves by defining what they hope to achieve within a specific period of time. Management controls IT controls that determine and mitigate risks to critical assets, sensitive data, or operations, including standards, organizational structure, and physical and environmental controls. Management skills Skills that involve managing the people and processes that accomplish specific organizational objectives; include planning, organizing, staffing, directing, monitoring, and controlling. Manufacturing costs Those costs associated with the manufacture of goods or the provision of services. Manufacturing overhead budget A type of budget that includes all production costs other than direct materials and direct labor. Marginal cost The change in total cost divided by the change in quantity, or the extra cost of one more output unit. Marginal cost of capital The amount of money an organization can raise before increasing the cost of capital. Market penetration pricing A product pricing strategy that uses a relatively low market entry price in order to attract large numbers of buyers to win a large market share. Market price model A transfer pricing model that sets the internal transfer price for a good or service at the going market price. Market segmentation The process of defining different customer groups. Market signals Cues in the marketplace about an organization's actions or possible actions. Market skimming pricing A product pricing strategy that sets a high price for a new product or service with the goal of convincing buyers that the product offers superior value. Market value The combination of the present values of separate cash flows. Market-based pricing A pricing approach that takes competitors' prices into account. Matching principle An accounting principle that states that when practical to do so, expenses should be recognized in the period in which the corresponding revenues are recognized.

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Materiality A threshold level above which items would make a difference to a decision-maker (material) and below which the items are insignificant (immaterial). Matrix structure An organizational structure that is a team and project-based approach between functions and divisions. Mature industry An industry that is fairly well established. Maturity matching A method of mitigating risks by matching the maturities of liabilities to the maturities of assets. Mean The simple average, computed by adding all the numbers in a series of n samples and dividing by n. Mean absolute deviation (MAD) The average distance of each value in a distribution from the mean value of the distribution (sum of the differences divided by the number of items in the distribution). Median

The exact midpoint of a distribution, with an equal number of items below it and above it.

Mediation A process in which a neutral third party intervenes to help parties in a dispute negotiate their differences. Memo posting Type of processing that is halfway between batch and real-time processing. Creates real-time entries that are posted to a temporary memo file (which allows the updated information to be viewed); at a designated time the memo file is batch-processed to update the master file. Mentoring A process whereby a mentor who has developed certain expertise shares that expertise with a protege. Merchandise purchases budget A type of budget that shows the amount of merchandise an organization needs to purchase during a period. Metropolitan-area network (MAN) A computer network of local-area networks for a city, campus, or other medium-sized area. Milestone chart A project scheduling technique that divides a project into sequential activities with estimated start and completion times. Misappropriation of assets Theft of a material amount of an organization's assets. Mitigating controls Controls that compensate for the lack of an expected control; for example, close supervisory review may compensate for a lack of segregation of duties where a small staff size makes proper segregation impractical. Mobile e-commerce Commerce over mobile devices such as smart cell phones. Mode

The number that occurs most frequently in a series.

Model risk A type of risk that involves having no model for monitoring or identifying risk levels. Money market instruments Short-term, highly liquid instruments issued by a borrower who has outstanding credit.

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Mortgage bonds Bonds secured by real estate. Motivation An individual's desire or drive toward a reward or goal. Moving averages method A smoothing method that uses the average of the most recent data value set of a given time period. Multibusiness organization An organization with more than one business operation under its umbrella. Multidomestic industry An industry in which the products and services are segmented by country and are not competitive from country to country. Multidomestic strategy A strategy in which the organizations in host countries are subsidiaries with their own control of operations. Multilocal strategy A strategy in which the organizations in host countries are subsidiaries with their own control of operations. Multinational organization An organization that serves customers in various countries. Multinational strategy A strategy in which an organization's home and host countries are closely connected to operate on a worldwide basis. Multiple regression analysis A statistical technique used to trace the effects of more than one independent variable on one dependent variable. Multiplexer Networking hardware that combines multiple channels into a single channel, such as multiple phone lines sharing a single physical phone line. Multisource rating An appraisal method that solicits evaluation feedback from everyone an employee interacts with, including subordinates, superiors, and internal and external customers, as well as the employee. Municipal notes Notes issued by local or state governments; can be exempt from some taxes and are liquid but not risk-free. Narrative appraisal methods Appraisal methods that require appraisers to submit written narrative performance appraisals. Narratives A mapping process that provides a step-by-step picture of a process in a single document without the use of detailed symbols or keys. Natural cause A random cause of variability in a sample. Negotiated price model A transfer pricing model that sets the transfer price through negotiation between the buyer and the seller (managers of different business units). Negotiation A process of bargaining between two or more parties to try to reach a mutually acceptable outcome.

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Net present value (NPV) method Capital investment decision model in which the present value of a project's cash inflows is compared to the present value of the project's cash outflows; the difference between these values determines whether or not the project is an acceptable investment. Net realizable value (NRV) The sales price of an asset, usually inventory, less the costs of completion and transportation or disposal that can be predicted within reason. Net working capital ratio A ratio that measures the relationship of short-term debt to short-term assets by subtracting liabilities from assets; a larger number indicates a greater ability to pay current debts. Network address translation (NAT) Used by firewalls with packet filtering and stateful inspection to hide the internal host computer IP addresses from sniffer utilities. Network analysis A type of analysis that involves evaluating the network of tasks and functions that contribute to a project in order to determine the most efficient path for reaching the project goals. Network IPS (NIPS) Hardware and software systems on a network that analyze incoming packet content, dropping malicious packets. Network structure A structure that involves relationships between multiple organizations or separate entities within an organization that perform different aspects of work. Neutrality Making choices that are free from bias toward a predetermined result and that place the relevance and reliability of information above other concerns. Noncurrent assets Any assets that do not qualify as current assets. Nonmanufacturing costs All the items that cannot be included in product costs and must be expensed in the period in which they occur. Nontariff trade barriers (NTBs) Trade barriers such as licensing requirements, unrealistic quality standards, or undue amounts of red tape in customs. Normal costing system A cost measurement system that applies actual costs for direct materials and direct labor to a job, process, or other cost center and then uses a predetermined rate to assign overhead to cost centers. North American Free Trade Agreement (NAFTA) A trade agreement that lowered trade barriers among the US, Mexico, and Canada. Off-balance-sheet accounting (OBSA) methods Legal loopholes that allow organizations to acquire funds without having to report a related liability on the balance sheet. Official reserves Quantities of foreign currencies held by the central bank of every nation. Online analytical processing (OLAP) Software that allows multiple perspectives for a set of data to be analyzed. Open market operations When the US Federal Reserve System buys or sells government securities (bonds, notes, and bills) in the open market from the public.

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Open Systems Interconnection (OSI) reference model A method of defining how messages should be sent through a network so that unrelated products can work together. Operating budgets Plans that identify needed resources and the way these resources will be acquired for all day-to-day activities of an organization, including sales and services, production, purchasing, marketing, and research and development. Operating expenses All the items that cannot be included in product costs and must be expensed in the period in which they occur. Operating leases Short-term, pure rental agreements where the asset and the related liability remain off the lessee's books (they simply debit lease expense and credit cash). Operating leverage The proportion of fixed costs used in the production of goods or services. Operating profit margin A measure of operational efficiency as well as effective pricing and cost controls. Operating system (O/S) The software interface between the hardware and the applications and end user. Operation costing A hybrid costing system that incorporates elements of job costing and process costing; assigns direct materials to each job or batch but assigns direct labor and overhead in a manner similar to process costing. Opportunity As related to risk, an uncertain event with a positive consequence. Opportunity costs The potential benefits given up when one alternative is selected over another. Option-type contract Type of derivative in which the buyer pays a premium or a percentage of the underlying asset's value to get the right, but not the obligation, to purchase or sell the asset over a particular period. Ordinary annuity An annuity that requires payment at the end of each period. Organizational dynamics The ways individuals and groups interact and cooperate in an organization. Organizational strategy A strategy that focuses on the entire organization and its plans for moving into the future and achieving its goals and objectives. Organizational structure An organization's formal decision-making framework and its way of organizing authority, responsibilities, and performance activities. Other comprehensive income The subset of comprehensive income that includes all items that are not included on the income statement in the calculation of net income but that still affect stockholders' equity. Output controls Detective controls that find errors and verify the accuracy and reasonableness of output data after processing is complete. Over-the-counter trading Privately arranged trades (no exchange intermediary); allow customization to meet investors' needs.

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Overhead budget A type of budget that includes all production costs other than direct materials and direct labor. P chart

A control chart that tracks the variability in a percentage measure of errors (or other attributes) in successive samples.

Packet A general term describing a logical grouping of data passing through network layers. Packet filtering A type of firewall that compares source and destination addresses to an allowed list, examining headers and other fields in packets of data. Par value (1) The amount of a bond owed at maturity; (2) a nominal price per share, set at issuance, usually at a low price to make it unlikely that a stock price will go below this value. Pareto diagram A histogram that breaks down quality problems into their various causes and lists them from most to least prevalent. Partnership (business type) An association between two or more persons or corporations to be co-owners in a business for profit, such as a law firm. Passive control A type of control that operates without human intervention; may be built into a computer system or a relationship or process that possesses control implications. Patch management The installation of released bug fixes to applications that are already in production. Patent The exclusive right to sell, use, or manufacture something for a period of 20 years. Payback method A capital investment decision model that focuses on the payback period. Payback period The time required for an organization to recover its original investment in a project. Payroll tax Tax that is levied directly on wages and salaries. Peak The point at which economic activity reaches a temporary maximum. Peer-to-peer network A type of computer network that is a direct connection between two computers. Pension Deferred employee compensation to be paid during retirement. Performance appraisal A process that measures the degree to which an employee accomplishes the work requirements stated in the performance standards and then communicates that information to the employee. Period costs All the items that cannot be included in product costs and must be expensed in the period in which they occur. Periodic inventory system An inventory accounting method that determines only the inventory on hand at the end of a period by physical count.

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Perpetual inventory accounting An inventory accounting method that keeps a continuous record of inventory changes as they occur. Personal-area network (PAN) A computer network that supports wireless connections within a room or small area. Pervasive risk The type of risk found throughout the environment. Physical access controls The means of preventing access to an asset such as locks and/or key cards preventing access to a building, to data centers, and to key operational areas. Physical evidence Type of evidence that includes physical objects such as clothing, weapons, tools, machines, photographs, maps, models, computer animation, motion pictures, diagrams, x-rays, and physical examinations. Pioneering An effort to be the first, or at least an early, entrant in a market and become the market leader. Place

In terms of the 4 Ps of marketing, the area concerned with how a product or service reaches the customer.

Pledging receivables/factoring Type of asset-backed security in which finance companies (acting as factors) purchase receivables and collect payments from customers directly, also charging a fee to the seller to compensate for bad debts. Political risk Any government or political action that would harm a country's business environment. Polycentric orientation In terms of international operations, an orientation that gives much latitude to the host country to make decisions locally and direct operations. Port In terms of networking hardware, a physical connection point to a device. Portfolio leverage risk The use of debt contracts that use money that the organization doesn't have; occurs because derivatives require little or no money up front. Portfolio theory A theory that states that as most financial assets are held in portfolios, measuring portfolio risk and finding the value of the portfolio are more important than individual asset risks and returns. Positioning The way products are differentiated from the competition. Positive conflict A type of conflict that leads to beneficial results; can transform the ways in which individuals interact and improve the quality of conflict outcomes. Positive pay A control that involves preparing a log of all checks to be disbursed and sending it to the bank; the bank then pays only items that reconcile. Post-close trial balance A balance that is prepared after closing to show that debits and credits of the real accounts (assets, liabilities, and shareholders' equity) are equal. Posting To record an item from the journal into the general ledger, including summarizing and classifying the items.

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Preferred stock Stock that has both debt and equity qualities; gives preference in liquidation and has a fixed but optional dividend. Premium

The price paid for an option.

Prepayments Either prepaid expenses, which are cash paid for goods or services prior to their consumption and treated as assets, or unearned revenues, which are cash received from customers as prepayment for goods or services and treated as liabilities. Preventive control A type of proactive control that deters undesirable events from occurring. Price The cost of a product or service to the customer. Price ceiling A legal maximum on the price of a good or service. Price floor A legal minimum on the price of a good or service. Price standard In standard costing, the amount that should be paid for the quantity of input to be used. Primary evidence A type of evidence that is generally documentary; original writing is required when available. Primary key In a database, a unique key field number (i.e., a proper noun) used to identify a specific entity. Principled negotiation A method to decide issues based on their merits rather than on competitive or cooperative negotiating tactics. Private key encryption An encryption method in which a sender creates an encryption key and sends it to a trusted receiver, who can use it to decrypt all messages in that session. Privatization The sale of a government-owned operation to a private investor. Process analysis A collection of analytical techniques that examine and measure the basic elements of processes in order to understand their activities, relationships, and contributions to organizational goals. Process costing system A costing system that accumulates product or service costs by process or department and then assigns them to a large number of nearly identical products by dividing the total costs by the total number of units produced. Process flowcharts Two-dimensional graphic representations of an operation in terms of the flow of activity through a process using graphic elements to represent tasks, flow, and inventory (storage). Process-flow analysis A two-dimensional graphic representation of an operation in terms of the flow of activity through the process. Processing controls Automated error checks built into computer processing as well as segregation of duties such as controlling programmers' access to files and records. Product In terms of the 4 Ps of marketing, the physical product, service, or other offering that provides value to the customer.

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Product costing The process of accumulating, classifying, and assigning direct materials, direct labor, and factory overhead costs to products and services. Product costs Those costs associated with the manufacture of goods or the provision of services. Production budget The plan for acquiring resources and combining them to meet sales goals and maintain a specific level of inventory. Productivity Refers to the quantity of an organization's outputs (products and services) in relationship to the inputs (human and physical resources). Program evaluation review technique (PERT) A project management tool used to schedule, organize, and coordinate tasks within a project. Project budget A type of budget that is used when a project is completely separate from other elements of an organization or is the only element of a company. Project management The process of planning, organizing, directing, and controlling an organization's resources (people, equipment, time, and money) so that objectives can be met within defined scope, time, and cost constraints. Promotion The marketing of a product or service through advertising, development of brand, incentive programs, and sales initiatives. Property dividends A type of dividend paid in the form of property, investments, etc., accounted for at the fair value of the assets given. Property tax A tax based on the value of taxable property, including residential housing, farms, factories, and business equipment. Protectionism The existence of barriers to free trade. Proxemics Study of perceptions of space and personal contact. Public data network (PDN) A computer network that allows public access, such as the World Wide Web. Public key encryption An encryption method in which two keys are created, private and public. The sender places the public key in a directory or an application automatically applies it to lock sent data; to decrypt the data, the private key must be used. Qualitative forecasting methods Forecasting methods that involve the use of expert judgment. Quality An organization's standards of excellence for product or service output. Quality audit An in-depth review of a company's processes and strategy from a quality standpoint, including analysis of best and worst practices. Quantitative forecasting methods Forecasting methods that make use of statistical or mathematical models designed to simulate reality and help in decision-making.

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Quantity standard In standard costing, the amount of input that should be used per unit of output. Quasi-integration Refers to not having complete ownership and financial responsibility for value chain areas. Quick ratio A ratio that is similar to the current ratio but eliminates inventory, which is considered the least liquid portion of current assets and therefore the least available for reducing current debts. R chart A control chart that tracks the variability of the range of values in successive samples. Rationing Government control of the quantity supplied of a specific item; used to ensure fair distribution of scarce resources. Real-time processing A type of processing in which a record is processed as soon as it is submitted. Realizable Describes assets that can be readily converted to cash without significant extra expense through sale in an active market at prices that can be easily determined. Realized Describes assets such as goods or services that are exchanged for cash or claims to cash. Recession A period of at least six months after a peak and before a trough during which the economy declines as measured by gross domestic product. Recognize To record revenue as a journal entry. Record In a database, a logical grouping of fields. Recovery A period characterized by an expansion in the economy during which employment and economic output increase. Recruitment The process of generating a pool of qualified applicants for an organization's jobs. Redundant character check A hardware control in which each transmitted data element receives an additional bit (character) of data mathematically related to the data; abnormal changes will void the mathematical relationship. Regiocentric orientation In terms of international operations, an orientation in which there is high coordination and communication within a specific region. Regional strategy A strategy that combines aspects of the multinational, international, and multilocal strategies; focus is on producing regional products with a regional value chain. Regression analysis A statistical technique used to measure the amount of change in one value in relation to a change in another value. Relational database A database management system that is arranged into two-dimensional files called tables, with links between tables that share a common attribute.

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Relevance A characteristic of information that is gathered in time to help make decisions because it has feedback and/or predictive value and timeliness. Relevant costs Costs yet to be incurred that differ between alternatives. Relevant range The range of activity within which the assumptions about variable and fixed costs are valid. Reliability A measure of the neutrality of the sources of information, faith that the information represents what it purports to represent, and its independent verifiability. Reporting currency The currency in which a parent company presents its financial statements. Representational faithfulness The assurance that descriptions of events and financial transactions correspond closely to what occurred in reality. Repurchase agreement The sale of product or inventory with an agreement to buy back the goods in the future; (2) a type of money market instrument in which a securities dealer issues a government security, agreeing to repurchase it on a specific date. Research A methodical process or search designed to discover new knowledge. Reserve requirements Regulations regarding the minimum amount of resources that banks must hold against deposits. Residual risk The risk remaining after management takes action to reduce the impact and likelihood of an adverse event, including control activities in responding to a risk. Resource An economic element applied or used to perform activities (such as salaries and materials). Resource cost driver A measurement of the amount of resources consumed by an activity. Responsibility accounting The process of recognizing subunits (responsibility centers) within an organization, assigning responsibilities to the managers of those subunits, and evaluating the performance of those managers. Responsibility center Any portion of an organization in which the manager is given responsibility for costs, profits, revenues, or investments; can be a single individual, a department, a functional area, or a division. Retained earnings The accumulated net incomes (losses) that have been retained in an organization. Return on capital A measure of an operation's effectiveness in using debt and equity to generate earnings. Return on equity (ROE) A measure of an operation's relative success in generating net profits (profits after subtracting cost of goods sold, operating expenses, interest, and taxes) from a given amount of shareholders' equity. Return on investment (ROI) A measure of an operation's effectiveness in using assets to generate profits.

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Revenue recognition The principle in accrual accounting that governs when it is appropriate to record a journal entry for revenue and the amount of revenue to record; revenue should be recognized when it is realized or realizable and earned. Revenues Enhancements or inflows of assets and/or settlements of liabilities generated when an organization makes or delivers goods or services as part of its primary ongoing operations. Ring network A network topology in which the network is arranged in a circle, so two paths for data are available. Risk

The possibility of an event occurring that will have an impact on the achievement of objectives; measured in terms of impact and likelihood.

Risk analysis The identification of risk, the measurement of risk, and the process of prioritizing risk or selecting alternatives based on risk. Risk appetite The amount of risk an organization is willing to accept in pursuit of value. Risk assessment The identification of risk, the measurement of risk, and the process of prioritizing risk or selecting alternatives based on risk. Risk classification The assignment of risk into categories, such as financial risk, operational risk, strategic risk, or reputation risk. Risk identification The method of recognizing possible threats and opportunities. Risk management A process to identify, assess, manage, and control potential events or situations to provide reasonable assurance regarding the achievement of an organization's objectives. Risk measurement The evaluation of the magnitude of risk. Risk prioritization Ranking risks, formally or informally, from the highest to the lowest. Risk response The actions taken to manage risk. Risk tolerance The acceptable levels of variation relative to the achievement of objectives. Robust quality conformance A type of conformance that requires all products or services to meet a target value exactly, with no variation. Rolling budget A 12-month budget system that rolls forward one month (or quarter) as the current month (or quarter) is completed. Router

In terms of networking hardware, an intelligent processor that networks devices using protocols.

Run chart A type of chart that illustrates trends and results over a specified period of time. Sales budget A projection of expected sales in units and expected selling prices.

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Sales tax A percentage of the amount paid for some purchases of goods and services. Salvage value The estimated value of an asset if sold at the end of its depreciation period or service life. Scenario building A process of developing several future alternatives, or scenarios, to help prepare for future uncertainties. Scenario writing Developing a conceptual scenario of the future based on a well-defined set of assumptions. Schema

The overall rules for a database.

Scientific evidence Evidence produced by expert scientific techniques such as experiments, chemical evaluation, and other tests. Secondary evidence A type of evidence that is inferior to primary evidence in reliability; may be a copy of a document or oral evidence of a document's contents. Securitization An asset-backed security that makes a pool of assets into a type of mutual fund by selling shares in the pooled principal and interest payments. Security risk management The processes an organization puts into place so that security controls and expenditures are fully commensurate with the risks to which the organization is exposed. Segmented audit cycles Subdivisions of the audit cycle broken down by major business processes for the purpose of simplifying audits. Selective perception The process of selecting some information and filtering out other information as it is received based on our needs, interests, values, opinions, and past experiences. Self-management Effectively managing one's own activities and goal accomplishments in the work environment. Selling and administrative expenses budget A type of budget that includes nonmanufacturing expenses. Sensitivity analysis A type of analysis that describes how changes in probabilities and/or changes in payoffs affect a recommended decision alternative. Serial bonds Bonds that have staggered maturity dates. Server A powerful computer with high bandwidth dedicated to a specific task such as providing access to files or managing the common application needs of an organization. Service cost A liability that accrues interest expense based on a settlement rate determined by actuaries, reflecting the interest rate needed to settle the assets if the plan were terminated. Service-oriented architecture (SOA) A software system design that allows for sharing of Web services as needed; a service consumer gets Web services from various service providers.

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Significant engagement observations Those conditions that, in the judgment of the chief audit executive, could adversely affect an organization achieving objectives; may include conditions dealing with irregularities, illegal acts, errors, inefficiency, waste, ineffectiveness, conflicts of interest, and control weaknesses. Simple rate of return method A capital budgeting method that measures the return on a project in terms of net operating income. Simulation A widely used quantitative analysis technique in which software tools model the operation of a system and perform various computations. Six Sigma A quality process improvement approach that focuses on the customer experience by reducing the number of defects in a process until they approach statistical insignificance. Slack time The amount of additional time an activity can consume without delaying a project past the expected completion date. Smoothing An analytical method in which random fluctuations from the irregular component of the time series are averaged out. Social networks Patterns of relationships between social units, or "actors." Software license agreement A contract between an organization and a software vendor specifying terms of use. Software piracy Making illegal duplicate copies of software or installation of software beyond what is allowed in a license agreement. Solvency The ability to pay debts as they mature. Spam Unsolicited bulk e-mail. Span of control The number of employees who report to an individual in the chain of command. Special purpose entity (SPE) A subsidiary created by a parent company to perform a specific task, often part of an off-balance-sheet accounting arrangement. Specific identification method An inventory cost flow method in which each specific item in inventory held or sold is tracked separately; most often used for special order or low-volume, high-cost goods. Speculator The counterparty that accepts the opposite position from the hedger in a derivative transaction, taking on higher market risk with the expectation of greater returns. Staffing The process of identifying human capital needs for the internal audit function and internal audit activities and ensuring that qualified individuals are available for engagements. Standard costing system A cost measurement system in which costs are assigned to products using quantity and price standards for direct materials, direct labor, and overhead using a predetermined (standard) rate. Star network A network topology in which each device is wired to a central device that routes data to or from other devices, eliminating the need to wire between devices.

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Stateful inspection A type of firewall that enhances packet filtering by monitoring packet flows in general. Statement of cash flows A financial statement used to show cash levels as of two moments in time: the beginning of the period and the end. Statement of retained earnings A financial statement that starts with the balances from the end of the prior period and shows changes due to net income (loss) and dividends for the period or any new issuances or repurchases of stock. Statement of shareholders' equity A financial statement that starts with the balances from the end of the prior period and shows changes due to net income (loss) and dividends for the period or any new issuances or repurchases of stock. Stereotype An assumption or generalization made about someone that is not reflective of the person. Stock dividends Dividends that pay shares of stock, reclassifying a portion of retained earnings as paid-in capital instead of reducing total assets or shareholders' equity. Strategic alliances Agreements between organizations from different countries to conduct business. Strategic business unit (SBU) Each business or set of businesses in a multibusiness organization. Strategic plan A document that indicates how an organization will carry out its mission, vision, goals, and objectives, given factors in the internal and external environments. Strategic planning The process organizations use to determine where they want to be and how they will get there. Strategy The plans and means for developing advantageous positions and outcomes. Structural analysis A method for analyzing the elements of industry structure and the factors that affect and drive industry competition. Structural group A group that is dictated by an organization's formal organizational chart or governance structure, typically with an appointed supervisor and subordinates. Structural unemployment A type of unemployment that exists when there is enough demand to provide full employment but the types of demand don't match the available labor force. Subordinate bonds Bonds that have a lesser claim to cash in a default situation than other bonds. Subschema Files describing a portion of a database, including authorized read-only/full access users. Subsequent events Events that occur after the balance sheet date (usually the end of the fiscal year) but before the financial statement issuance date; they should be disclosed if material (i.e., useful to users), such as sale of a plant. Sunk costs Any costs that have already been incurred and that cannot be changed by any decision made now or in the future.

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Supply chain A global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. Supply-side policies Policies that address factors that will, over time, increase the potential of full-capacity output of the economy. Swap An over-the-counter (possibly dealer-orchestrated) exchange or swap between two counterparties of required payment streams for a specific time period. Swaption A swap option that gives the buyer the right, but not the obligation, to call (buy) or put (sell) a swap. SWOT analysis A common way to analyze internal and external information; SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Symmetric encryption An encryption method in which a sender creates an encryption key and sends it to a trusted receiver, who can use it to decrypt all messages in that session. Synergy When cooperative efforts bring about a result that is much stronger and advantageous than the sum of the individual parts alone. Talent management A strategic approach to attracting, developing, engaging, and retaining the right people to meet current and future business needs. Target costing Estimating the price for a product or service that potential customers will pay. Target pricing Estimating the price for a product or service that potential customers will pay. Targeting The process of selecting product markets. Tariffs Excise taxes imposed on the imports of particular goods or services. Task group A group charged with the completion of a task; the group's formal existence is expected to end with the completion of the assigned task. Team A smaller group of individuals that has been organized to accomplish a common purpose and performance objectives. Technical controls The specific IT controls that must be in place for management and governance controls to be effective. Technoglobalism The way organizations are able to capitalize on the use of technology and expand research and development and other capabilities through global telecommunication networks. Term bonds An issue of bonds that all have the same maturity date. Term loans Loans with floating or fixed interest and a fixed maturity.

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Terrorism The use or threat of violence for political reasons. Testimony When lay witnesses are called on to testify about all types of physical evidence as well as events and facts about which they have personal knowledge. Theory of constraints (TOC) A systems management philosophy that states that every system has at least one constraint (bottleneck or barrier) limiting its output in pursuit of some goal. Time management The way a person selects priorities and engages in daily activities. Time series analysis A series of measurements taken at successive points in time or over successive periods of time (hours, days, months, etc.). Time value of money The concept that money received today is worth more than money received tomorrow because the money could be invested to earn a return greater than the original investment. Timeliness The concept that information must be available at the time the decisions need to be made or it will be of no value. Times interest earned A measure of an organization's ability to service all of its liabilities; the number of times a company can cover fixed obligations with earnings before interest and taxes (EBIT). Total asset turnover A measure of how well assets are being used to produce revenue. Total quality management (TQM) An integrated quality management system that involves managers and employees and uses quantitative methods to continually improve an organization's processes. Trade credit The financing advanced to a buyer to facilitate sales; results in an account receivable. Trade loading The practice of manufacturers inducing their wholesalers to carry more inventory than they can reasonably sell. Trade names Symbols or words that distinguish an organization or product. Trademarks Symbols or words that distinguish an organization or product. Trading on the equity The use of fixed interest in the form of debt or preferred equity stock with the expectation of earning a greater return than the cost of the fixed interest. Training The process in which people acquire the capabilities to help them achieve organizational goals and objectives. Transfer pricing A system for pricing products or services that are transferred from one organizational subunit to another within the same organization. Transfer risk A situation in which a government restricts movement in and out of the country.

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Translation exposure The risk that fluctuations in exchange rates will affect reported income. Transnational corporations (TNCs) Corporations that span borders in their organizational structures; they play a significant role in world trade. Transnational strategy A strategy in which an organization's home and host countries are closely connected to operate on a worldwide basis. Treasury bills (T-bills) The most common money market instrument; government securities that are highly liquid with an active secondary market and that mature in a year or less. Treasury notes (T-notes) Government securities with maturities of one to ten years. Treasury stock Stock that has been repurchased by the issuing organization, reducing both assets and stockholders' equity. Treasury stock method A method of determining the impact of warrants and other options that assumes that they are converted at the start of the year or when they become available but that the proceeds are used by the organization to repurchase as many shares as possible. Trend analysis A type of analysis used to review historical sequences of data; more appropriately used in reviewing data from income statements or expense statements rather than balance sheets, which present financial information for a particular point in time. Trigger pricing A pricing agreement between two parties that allows a buyer or seller to trigger a particular pricing formula at the time of their choosing; a type of futures trading that allows the buyer and seller to protect themselves from anticipated price fluctuations. Trough

A period during which economic output is at its lowest level following a recession or depression.

Undistributed earnings The accumulated net incomes (losses) that have been retained in an organization. Unemployment Measured by dividing the number of people actively seeking employment by the total workforce. Uniform Resource Locator (URL) The combination of transfer protocol, domain name, directory path, and document name. Upper control limit The value that is farthest from the mean in the positive direction but still within the range that represents statistical control. Use tax A tax that is collected for a particular need, such as a gas tax levied to maintain roads. Value added Refers to activities that convert resources into products and services that are consistent with external customer requirements. Value at risk A ratio used as a prospecting tool to determine the maximum loss over a future period of time given an assigned level of probability.

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Value chain A model to analyze an organization's value creation activities. Value proposition A positioning statement that describes added value to a customer. Value-added network (VAN) A service organization that provides networking services to clients, including connectivity, data security, and information sharing. Value-added tax (VAT) A tax that applies the equivalent of a sales tax to every operation that creates value. Value-based pricing A pricing method in which the price is set by how much a customer might reasonably pay based on a product's worth. Variable cost model A transfer pricing model that sets transfer prices at the unit's variable cost, or the actual cost to produce the good or service less all fixed costs. Variable costing A method of inventory costing in which all variable manufacturing costs are included as inventoriable costs except for fixed manufacturing costs, which are treated as costs of the period in which they are incurred. Variable costs Costs that rise and fall as a firm's output level rises and falls. Variance

A number that measures the degree of dispersion from the mean of all values in a sample.

Variance analysis An analytical procedure that begins with the recognition that one set of data differs from another set in an unexpected way; for example, expenses for the current period may be unexpectedly greater than expenses for the past period by a significant amount. Verifiability The extent to which a high degree of consensus can be formed between independent measurers when using the same techniques. Vertical common-size financial statements Financial statements that express the amounts as a percentage of a chosen base, such as sales or cost of goods sold on the income statement or total assets on the balance sheet. Vertical integration A circumstance where an organization owns and controls several different subsidiaries to promote cost and efficiency benefits. Virtual organization A geographically dispersed organization that is linked together through electronic communications. Virtual private network (VPN) A secure method of connecting two points on the Internet, often run by an Internet service providers. Virtual teams Teams that are dispersed geographically and primarily communicate via electronic methods. Virus Malicious code that attaches itself to storage media, documents, or executable files and is spread when the files are shared with others.

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Voluntary export restrictions (VERs) A situation in which firms voluntarily limit the amount of their exports to specific countries, generally to avoid more stringent trade barriers or the imposition of import quotas. Warrants Certificates allowing the holder to purchase stock shares at a set price over a given period of time. Web services Use open Internet protocols and standards to create stand-alone, modular software called services that are capable of describing themselves and integrating with other similar services. Weighted average cost of capital (WACC) The proportion of debt used in an organization times the after-tax cost of debt, plus the proportion of equity used times the cost of equity. Weighted average method A method for calculating the equivalent units of production for a department that uses the number of units transferred to the next department or to finished goods plus the equivalent units in the department's ending WIP inventory. Weighted marginal cost of capital The incremental cost required to surpass the prior marginal cost of capital break point. Weighted moving average A smoothing method that assumes that the most recent data has more power of prediction than data that came before, so more weight is given to the most recent data. Wholly owned subsidiary Situation in which an organization owns all of a foreign operation. Wide-area network (WAN) A computer network made up of local-area networks over a large area (e.g., nation or world) using multiple transmission media. Work groups Groups that collaborate but do not have a purpose toward express performance objectives and results. Work sheets Paper or electronic documents arranged in columnar format for accumulating and recording adjusting entries when preparing financial statements. Work-in-process (WIP) Consists of raw materials that have been only partly transformed into their finished state or components that have not been installed or connected. Working papers Paper or electronic documents arranged in columnar format for accumulating and recording adjusting entries when preparing financial statements. World Bank A group of five international organizations responsible for providing financing and advice to countries for economic development and elimination of poverty. World Trade Organization (WTO) An organization established by the General Agreement on Tariffs and Trade that administers trade agreements, provides a forum for negotiations, and handles disputes between trading partners. Worm Self-replicating malicious software that can disrupt networks or computers. X-bar chart A control chart that tracks variability in the means of successive samples.

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Yellow Book Special government auditing standards published by the US Comptroller General. Yield-to-maturity (YTM) The combination of the present values of separate cash flows. Zero defects conformance Conformance to a quality specification expressed as a specified range around a target. Zero-balance accounts (ZBAs) Disbursement accounts that are maintained at a zero balance. Zero-based budget A type of budget that starts with zero dollars allocated to budget items rather than making incremental changes to already existing allocations. Zero-coupon bonds Bonds that carry zero or very low interest but are instead issued at a substantial discount from par value, resulting in amortized discounts (a tax deduction) to maturity and no payments until maturity. 360-degree feedback An appraisal method that solicits evaluation feedback from everyone an employee interacts with, including subordinates, superiors, and internal and external customers, as well as the employee.

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