Audit of financial statements- The objective of an audit of financial statements is to express an opinion on whether the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows in accordance with generally accepted accounting principles.

Chart of accounts- A list of account titles and numerical designations which are used to incorporate into the financial statements of a business entity.

Disclosure of information- According to Canadian generally accepted accounting principles, certain specific types of information must be disclosed on a company’s financial statements or in the attached notes to the financial statements. The required disclosures are very numerous and are listed in the Handbook of the Canadian Institute of Chartered Accountants. Here are a few examples: (a) accounting policies used for measuring inventory, carrying amounts of inventory at net realizable value, (b) for pension plans, a summary description of the plan, the funding policy, a description of how fair values have been determined, and details of investments in the plan sponsor, and (c) revenue recognition policy. The disclosures are not required for Notice to Reader financial statements to the same extent as for audits and review engagements.

Financial statements- A formal presentation of the financial activities of a business which provide an overview of its financial condition. The four standard financial statements are the balance sheet, income statement, statement of retained earnings and cash flow statement.

Generally accepted accounting principles (GAAP)- This commonly used expression refers to the broad accounting principles that are in general use in Canada at a particular time. The actual rulings as to whether a particular principle falls within GAAP are determined by the Canadian Institute of Chartered Accountants and updated from time to time. An audit of a Canadian corporation’s financial statements always includes an evaluation as to whether the statements have been presented in accordance with Canadian GAAP.