Audit and finance glossary

Clear, sourced definitions of 219 terms in independent audit, financial reporting, tax, capital markets and sustainability.

219 terms

A

Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Advance taxTax paid in advance during the year by income and corporate taxpayers, in quarterly periods, on current-period earnings.Adverse opinionThe opinion in which the auditor states that the financial statements are not presented fairly, where misstatements are both material and pervasive.Agreed-upon proceduresAn engagement in which the practitioner performs procedures agreed with the entity and, where relevant, a third party, and reports only the findings without providing assurance.Amortised costThe amount at which a financial asset or liability is measured at initial recognition, minus principal repayments, plus cumulative amortisation calculated using the effective interest method.Analytical proceduresThe evaluation of financial information through analysis of plausible relationships among financial and non-financial data.Arm's length principleThe principle that transactions between related persons should be carried out at the prices and on the terms that would apply between independent parties with no such relationship.AssociateAn entity over which the investor has significant influence but not control or joint control.Assurance engagementAn engagement providing assurance, against specified criteria, on a subject matter other than an audit or review of historical financial information.Audit committeeA committee of the board of directors responsible for overseeing financial reporting, internal control, internal audit and the independent audit.Audit documentationThe full set of working papers recording the audit procedures performed, the evidence obtained and the conclusions reached.Audit evidenceAny information and documents the auditor uses to reach the conclusions on which the opinion is based.Audit riskThe risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated.Audit samplingApplying audit procedures to some rather than all of the items in an account or class of transactions in order to reach a conclusion about the whole population.Auditor independenceThe auditor being free of relationships and interests that could affect their objectivity, and being perceived as such by third parties.Auditor rotationThe requirement, designed to protect auditor independence, for a company to be audited by another auditor or audit firm after a certain period.

B

BOBİ FRS (Turkish GAAP for SMEs)The financial reporting standard issued by the POA for large and medium-sized entities that are subject to independent audit but do not apply TFRS.Bonus issueIssuing shares to shareholders by adding a company's internal resources (reserves, retained earnings, capital adjustment differences) to its capital.Borsa IstanbulThe exchange in Turkey on which shares, debt instruments, derivatives and precious metals are traded.Business combinationA transaction or event in which an acquirer obtains control of one or more businesses.

C

Capital gainGains of individuals from disposing of certain assets and rights that are subject to income tax.Capital Markets Board (CMB)The independent administrative authority responsible for regulating and supervising capital markets in Turkey.Capital Markets Law No. 6362The principal law governing the operation of capital markets in Turkey, the obligations of issuers and the powers of the CMB.Carbon Border Adjustment Mechanism (CBAM)An EU regulation that puts a price on the embedded carbon emissions in the production of certain goods imported into the European Union.Carbon footprintThe total greenhouse gas emissions caused by an organisation, product or activity, expressed in carbon dioxide equivalent (tCO₂e).Certified public accountant (SMMM)A professional authorised to keep taxpayers' books, prepare their financial statements and advise on accounting and tax matters.Climate-related risksThe potential effects on a company's financial position of physical risks arising from climate change and transition risks arising from the shift to a low-carbon economy.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.Compliance auditAn examination of whether an organisation's activities are carried out in accordance with the relevant laws, regulations, contracts or internal rules.Compliance officerThe authorised person responsible for running the compliance programme for the prevention of money laundering and terrorist financing at an obliged entity.Compliance programmeThe full set of policies, procedures, controls, training and monitoring activities an organisation puts in place to ensure compliance with laws and internal policies.ConsolidationCombining the financial statements of a parent and the subsidiaries it controls as if they were a single economic entity.Contingent liabilityA possible obligation whose existence will be confirmed by uncertain future events, or a present obligation where an outflow of resources is not probable.Corporate governance principlesPrinciples set by the CMB for listed companies concerning shareholders, public disclosure, stakeholders and the board of directors.Corporate income taxThe tax levied on the earnings of capital companies, cooperatives and other corporate entities.COSOThe organisation that publishes the most widely accepted frameworks for internal control and enterprise risk management, and the general name for those frameworks.Cost of capitalThe minimum rate of return investors expect from an investment in return for the risk they take.Crypto asset service providerPlatforms and custodians providing services such as buying, selling, safekeeping and transferring crypto assets, subject to CMB regulation.Current account interest calculationThe product of the amount of current account movements and the number of days elapsed, used to calculate interest on a current account.

D

Data controllerThe natural or legal person who determines the purposes and means of processing personal data and is responsible for establishing and managing the data filing system.Debt instrumentBonds, bills and similar capital market instruments through which the issuer undertakes to pay investors principal and interest at a set maturity.Declining balance methodA method in which the depreciation rate is applied each year to the asset's remaining net book value, resulting in higher depreciation in the early years.Default interestInterest applied to taxes assessed as a result of a tax inspection, from the date on which they would have been payable had they been assessed on time.Deferred taxTax payable or recoverable in future periods, calculated on temporary differences between the carrying amounts of assets and liabilities in the financial statements and their tax bases.DepreciationThe systematic allocation of the cost of non-current assets to expense over their useful lives.Direct expensing limitThe limit, updated each year, below which fixtures and goodwill can be expensed directly without being depreciated.Disclaimer of opinionA type of report in which the auditor does not express an opinion because sufficient appropriate audit evidence could not be obtained and the possible effects could be both material and pervasive.Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Disguised profit distributionTransferring corporate profits to shareholders or related persons outside the tax base through transactions with related persons at prices or amounts that are not at arm's length.Double materialityAssessing sustainability matters both in terms of their effect on the company's financial position (financial materiality) and the company's impact on the environment and society (impact materiality).

E

E-invoiceIssuing an invoice electronically, in line with the standards set by the Revenue Administration, and transmitting it to the buyer.E-ledgerCreating, recording and storing statutory books electronically in accordance with set formats and standards.Earn-outA mechanism under which part of the purchase price is paid depending on the target company reaching certain performance targets after closing.Earnings per shareAn indicator calculated by dividing the net profit attributable to the parent's shareholders by the weighted average number of shares outstanding during the period.EBITDAEarnings before interest, tax, depreciation and amortisation; used as an indicator of the cash-like profitability generated by a company's core operations.Employee benefits (TAS 19)The standard governing accounting for short- and long-term benefits provided to employees in exchange for their services.Engagement partnerThe auditor who conducts the audit on behalf of the audit firm, is responsible for its results and signs the auditor's report.Engagement quality reviewAn objective evaluation, before the report date, of the engagement team's significant judgements and the conclusions reached, by an auditor from outside the team.Enterprise risk management (ERM)The process of identifying, assessing, managing and monitoring, in an integrated way, the risks that could affect an organisation's achievement of its objectives.Equity methodAn accounting method in which an investment is initially recognised at cost and subsequently adjusted for the investor's share of the investee's net assets.ESGShort for environmental, social and governance factors, used to assess companies' sustainability performance.Ethics hotlineA channel through which employees and third parties can report suspected irregularities, ethical breaches or fraud, confidentially or anonymously where needed.Events after the reporting periodEvents occurring between the end of the reporting period and the date the financial statements are authorised for issue.Exchange differencesThe difference arising from translating foreign-currency items at exchange rates on different dates.Expected credit lossCredit losses on financial assets that are estimated, taking forward-looking information into account, and provided for in advance.Explicit consentConsent relating to a specific matter, based on information and given freely.External confirmationThe auditor obtaining written confirmation of a balance or information directly from a third party (bank, customer, supplier, lawyer).

F

Fair valueThe price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.Fairness opinionAn independent expert opinion on whether the consideration proposed in a merger, acquisition or share transfer is fair from a financial point of view.Family constitutionA shared document in family businesses that governs relationships between family, business and ownership, and the rules for family members working in the company, joining management and transferring shares.Financial due diligenceA detailed review of the target company's financial position, profitability, indebtedness and risks before an acquisition or investment.Financial instruments (TFRS 9)The standard governing the classification, measurement and impairment of financial assets and liabilities, and hedge accounting.Financial modellingBuilding a model that forecasts the future financial performance of a company or project, with linked income statement, balance sheet and cash flow.Financial restructuringRescheduling a financially distressed company's debts in terms of maturity, interest or amount by agreement with creditors.Financial statementsThe set of reports presenting, in a structured way, an entity's financial position, performance and cash flows for a specific date and period.Foreign currency revaluation (tax)Revaluing foreign-currency assets and liabilities at period end by translating them into Turkish lira at the rates specified in tax legislation.Forensic accountingThe use of accounting, auditing and investigative techniques to produce evidence for legal disputes and allegations of fraud.FraudAn intentional act of deception by management, employees or third parties to obtain an unjust or illegal advantage.Fraud investigationA special investigation carried out to establish a suspected irregularity or allegation of fraud with evidence, and to determine its extent and the loss.Free floatThe proportion of a company's shares that trade freely on the exchange relative to total shares.Full tax certification (YMM)A sworn financial adviser examining the taxpayer's books, records and documents and certifying that the annual tax return complies with legislation.Functional currencyThe currency of the primary economic environment in which the entity operates.

G

Going concernPreparing financial statements on the assumption that the entity will continue its operations for the foreseeable future.GoodwillThe excess of the consideration paid in a business combination over the fair value of the acquired business's identifiable net assets.Green financeInstruments such as green bonds, green loans and sustainability-linked loans used to finance projects with environmental benefits.Greenhouse Gas ProtocolThe most widely used international accounting and reporting framework for organisations to calculate and report their greenhouse gas emissions.Group auditThe audit of the consolidated financial statements of a group made up of more than one component (subsidiary, branch, associate).

H

Hedge accountingA special accounting approach that ensures the profit or loss effects of a hedging instrument and the hedged item are recognised in the same period.

I

Impairment of assetsRecognising as a loss the excess of an asset's carrying amount over its recoverable amount.Independent auditReasonable assurance provided by an independent auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.Independent auditor's reportThe formal report in which the auditor sets out in writing the opinion reached on the financial statements and the basis for that opinion.Independent board memberA board member who has no significant relationship with the company or its management and meets the independence criteria.Inflation adjustment (tax)An adjustment made under tax legislation, when certain conditions are met, to remove the effects of price changes from the financial statements.Initial public offering (IPO)A company's shares being offered to investors for the first time with CMB approval and starting to trade on the exchange.InstitutionalisationA company's transition from a person-dependent management structure to an institutional structure with defined processes, authority and responsibilities, reporting systems and governance structures.Insurance contracts (TFRS 17)The standard ensuring insurance contracts are measured and presented consistently, measuring insurance liabilities using current estimates.Intangible assetsIdentifiable non-monetary assets without physical substance; software, licences, brands and patents are examples.Integrated reportingA company presenting its strategy, governance, performance and prospects in a single report that explains its value-creation process across financial and non-financial capitals.Interim auditAudit work carried out before year end, usually in the last quarter of the period, covering risk assessment, tests of controls and some tests of details.Interim financial reportingReporting covering complete or condensed financial statements for a period shorter than a full financial year.Internal auditAn independent, objective assurance and consulting activity that evaluates the effectiveness of an organisation's risk management, control and governance processes.Internal controlProcesses and controls designed by management to provide reasonable assurance regarding the effectiveness of operations, the reliability of financial reporting and compliance with laws and regulations.International Financial Reporting Standards (IFRS)The financial reporting standards issued by the International Accounting Standards Board (IASB) and used in more than 140 countries.Inventories (TAS 2)Assets held for sale in the ordinary course of business, in the process of production, or as raw materials and supplies to be used in production.Inventory count observationThe auditor attending the entity's year-end physical count to verify the existence and condition of inventories.Investment incentive certificateA certificate issued by the Ministry of Industry and Technology for investments under state aid schemes, providing support such as tax reductions and VAT exemptions.Investment propertyLand and buildings held to earn rental income, for capital appreciation, or both.Investor relationsThe function that manages communication between the company and its current and potential investors and analysts.Irregularity penaltyA fixed penalty imposed for failure to comply with the formal and procedural provisions of tax laws, regardless of whether tax revenue was lost.ISSBThe board established within the IFRS Foundation that issues global sustainability disclosure standards (IFRS S1, IFRS S2).IT general controlsControls over access management, change management, IT operations and system development that ensure information systems operate reliably.

J

Joint ventureA joint arrangement in which the parties with joint control have rights to the net assets of the arrangement.

K

Key audit mattersMatters that, in the auditor's professional judgement, were of most significance in the audit of the current-period financial statements and are described separately in the report.Key performance indicator (KPI)A numerical indicator used to measure the extent to which an organisation is achieving its strategic objectives.Know your customer (KYC)The processes by which obliged parties identify and verify their customers, determine the beneficial owner and understand the purpose of the business relationship.

L

Late payment surchargeA surcharge applied for each month from the due date when a public receivable is not paid on time.Lease certificate (sukuk)A capital market instrument issued by asset leasing companies to finance specific assets or rights, whose return is paid to investors as rent or profit share.Lease liabilityA liability measured as the present value of the lease payments to be made over the lease term.Leases (TFRS 16)The standard requiring lessees to present almost all leases in the statement of financial position as a right-of-use asset and a lease liability.LeverageThe extent to which a company uses debt to finance its assets or investments.Limited assuranceA level of assurance based on narrower procedures than reasonable assurance and expressed in negative terms.Locked box mechanismA price mechanism in which the purchase price is fixed on the basis of financial statements at a date before closing, and leakage of value after that date is prohibited.

M

Management letterA document in which the auditor communicates to management in writing the internal control deficiencies identified during the audit and recommendations for improvement.Management representation letterA letter in which management confirms in writing its responsibilities for the financial statements and the completeness of information provided to the auditor.Market size (TAM / SAM / SOM)The size of the total market for a product or service, the market the company can serve and the market share it can realistically obtain.MASAKThe Financial Crimes Investigation Board, affiliated to the Ministry of Treasury and Finance, which develops policy and supervises obliged parties in combating money laundering and terrorist financing.Material event disclosureThe issuer's immediate public disclosure on KAP of information and events that could affect the value of its shares or investors' decisions.MaterialityA misstatement being large enough, individually or together with others, to influence the economic decisions of users of the financial statements.Mergers and acquisitions (M&A)The general term for mergers of companies and for one company acquiring or disposing of another company or business line.Money launderingIntroducing proceeds of crime into the financial system and concealing their source so that they appear to come from legitimate sources.Multiples methodEstimating value using ratios of comparable companies' market values, or of prices paid in comparable transactions, to financial indicators.

N

Net debtFinancial debt and similar liabilities less cash and cash equivalents.Net realisable valueThe estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.Non-controlling interestsThe equity in a subsidiary not attributable, directly or indirectly, to the parent.Non-deductible expensesExpenses recorded in calculating commercial profit that cannot be deducted in determining taxable corporate income under tax legislation.Notes to the financial statementsDisclosures that explain the amounts in the financial statements, set out accounting policies and additional information, and form an integral part of the statements.

O

Occasional incomeGains earned occasionally, outside commercial, agricultural or professional activity.Occupational fraudDeceptive acts carried out knowingly to obtain an unjust or illegal benefit; misappropriation of assets and fraudulent financial reporting are its main types.Operating segmentsAreas of an entity's activity that are monitored separately by senior management and for which separate financial information is available.Other comprehensive incomeItems of income and expense recognised directly in equity rather than in profit or loss.

P

Participation exemptionThe exemption from corporate income tax of dividends a company receives from its holding in the capital of another fully taxable company.Performance materialityAn amount set below overall materiality to reduce the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality.Performance obligationA promise in a contract with a customer to transfer a distinct good or service.Personal Data Protection Law (KVKK)Law No. 6698, which governs the protection of fundamental rights and freedoms in the processing of personal data and the obligations of data controllers.Price determination reportA report explaining the methods and assumptions used to set the offer price of shares in an IPO.Private equity fundAn investment fund that invests in the equity of unlisted companies with the aim of exiting after a certain period at a higher value.Professional scepticismThe auditor having a questioning mind, being alert to conditions that may indicate error or fraud and critically assessing evidence.Property, plant and equipmentPhysical assets used in the production of goods and services, for rental or for administrative purposes, and expected to be used for more than one period.ProspectusThe document approved by the CMB containing the information investors need to make a decision about the issuer and the capital market instruments to be offered.Provision for severance payThe liability recognised in the financial statements for severance pay payable when employees leave after meeting the statutory conditions.Provisions (TAS 37)Liabilities of uncertain timing or amount; recognised when there is a present obligation arising from a past event, an outflow of resources is probable and a reliable estimate can be made.Public Disclosure Platform (KAP)The platform on which listed companies and other capital market institutions electronically publish the information they are required to disclose to the public.Public interest entityEntities considered to be of public interest because of their business, size or number of stakeholders, and subject to stricter audit rules.Public Oversight Authority (POA)The public authority in Turkey that sets accounting and auditing standards and authorises and oversees independent auditors and audit firms.Purchase price allocation (PPA)Allocating the consideration paid in a business combination to the identifiable assets acquired and liabilities assumed at their fair values, with the remainder determined as goodwill.

R

R&D deductionAn additional deduction for research and development expenditure in determining corporate income, subject to conditions set out in law.Reasonable assuranceA high but not absolute level of assurance; the level of assurance the auditor provides on the financial statements in an independent audit.RediscountDiscounting receivables and payables represented by notes with maturities to their present value by deducting the interest element accrued up to the valuation date.RefinancingRepaying existing debt with new financing, usually on more favourable terms.Related partyA person or entity that has a relationship of control, joint control or significant influence with the reporting entity.Reserve auditAn independent auditor verifying that a crypto asset service provider genuinely and fully holds the assets belonging to its clients.Revaluation (tax)Bringing depreciable assets and their accumulated depreciation up to current values under tax legislation.RevenueIncome arising in the course of an entity's ordinary activities.Revenue from contracts with customers (TFRS 15)The standard requiring revenue to be recognised to depict the transfer of goods or services to customers, at the amount the entity expects to be entitled to.Review of interim financial informationAn engagement in which interim financial information is reviewed, mainly through inquiry and analytical procedures, and negative assurance is provided.Right-of-use assetAn asset representing the lessee's right to use the leased asset over the lease term.Rights issueAn increase in a company's capital through cash or in-kind contributions by existing or new shareholders.

S

Sarbanes-Oxley Act (SOX)A US law enacted in 2002 requiring management of listed companies to assess internal control over financial reporting and the auditor to report on it.Scope 1, 2 and 3 emissionsThe classification of greenhouse gas emissions by source into direct emissions (Scope 1), indirect emissions from purchased energy (Scope 2) and other indirect emissions in the value chain (Scope 3).Segregation of dutiesA fundamental internal control principle requiring that initiating, approving and recording transactions and safeguarding assets be assigned to different people.Sensitivity analysisMeasuring the effect of changes in key assumptions on the outcome.Share buybackA company buying back its own shares on the market or from shareholders.Share purchase agreement (SPA)The agreement governing the price, payment terms, representations and warranties, indemnities and closing conditions in a share transfer.Special irregularity penaltyA penalty imposed for specifically listed acts such as failing to issue or obtain invoices and similar documents or breaching record-keeping rules.Stamp taxA tax levied on documents such as contracts, undertakings, receipts and payrolls, either proportionally or at a fixed amount depending on the nature of the document.Statement of cash flowsThe statement showing an entity's cash inflows and outflows for a period, classified into operating, investing and financing activities.Statement of changes in equityThe statement showing the changes in each component of equity during the period.Statement of financial positionThe statement showing an entity's assets, liabilities and equity at a specific date; also known as the balance sheet.Statement of profit or lossThe statement showing an entity's revenue and expenses for a period and the resulting profit or loss.SubsidiaryAn entity controlled by another entity (the parent).Substantive proceduresTests of details and analytical procedures performed on account balances, transactions and disclosures to detect material misstatements in the financial statements.Suspicious transaction reportA report made to MASAK by obliged parties when there is suspicion, or reasonable grounds for suspicion, that a transaction is related to money laundering or terrorist financing.Sustainability assuranceAn independent practitioner providing assurance on whether the information in a sustainability report has been prepared in accordance with the relevant reporting standards.Sworn financial adviser (YMM)A professional authorised to certify taxpayers' tax returns and certain transactions for compliance with legislation.

T

TAS 29 (Financial reporting in hyperinflationary economies)The standard requiring entities whose functional currency is the currency of a hyperinflationary economy to state their financial statements in terms of the purchasing power at the end of the reporting period.Tax calendarThe calendar showing the deadlines for filing returns and paying taxes.Tax inspectionThe tax administration investigating and establishing the accuracy of taxes payable through the taxpayer's books, records and documents.Tax loss penaltyA penalty imposed when tax is under-assessed because the taxpayer failed to fulfil tax obligations on time or fulfilled them incompletely.Tax payment deferralDeferring or paying in instalments a public receivable that cannot be paid when due, at the taxpayer's request and on provision of security.Tax returnThe official document in which a taxpayer reports the tax base and the tax calculated to the tax administration.Tax settlementAn administrative route enabling the taxpayer and the tax administration to reach agreement on assessed taxes and penalties before litigation.Terminal valueIn a discounted cash flow model, the value expressing in a single amount all cash flows after the explicit forecast period.Tests of controlsProcedures performed to evaluate whether an entity's internal controls operate effectively in preventing, or detecting and correcting, material misstatements.TFRS 20 (Regulatory assets and liabilities)The standard enabling entities with regulated tariffs to report timing differences between periods arising from the tariff mechanism as regulatory assets and liabilities.Thin capitalisationTreating for tax purposes as capital the borrowings a company obtains from its shareholders or persons related to them that exceed a certain multiple of its equity.Transfer pricingThe pricing of goods, services and financing transactions between related persons; tax legislation requires these prices to be at arm's length.Transparency reportThe annual report published by audit firms that audit public interest entities on their structure, quality control systems and independence practices.TSRS 1The standard setting out the general requirements for the disclosure of sustainability-related financial information.TSRS 2The standard setting out the disclosure requirements for climate-related risks and opportunities.Turkish Accounting Standards (TAS)The standards within the TFRS set that correspond to the International Accounting Standards (IAS).Turkish Financial Reporting Standards (TFRS)The financial reporting standards issued by the POA in line with International Financial Reporting Standards (IFRS).Turkish Standards on Auditing (BDS)The standards issued by the POA on the basis of the International Standards on Auditing (ISA) and applied in independent audits in Turkey.Turkish Sustainability Reporting Standards (TSRS)The standards issued by the POA on the basis of the ISSB standards for companies' reporting of sustainability-related financial information.

U

Unmodified opinionThe opinion the auditor expresses on concluding that the financial statements are presented, in all material respects, in accordance with the applicable financial reporting framework.US GAAPThe generally accepted accounting principles applied in financial reporting in the United States, set by the FASB.Use of proceeds reportA report showing whether the funds raised in an IPO or capital increase have been used for the purposes stated in the prospectus.

V

ValuationEstimating the monetary value of a company, share, asset or liability at a specific date and for a specific purpose.Value added tax (VAT)An indirect tax levied on the value added at each stage of the supply of goods and services and passed on to the final consumer.VAT refundRefunding to the taxpayer, in cash or by offset, VAT that cannot be recovered through deduction because of exempt transactions or reduced rates.VAT withholdingThe buyer declaring and paying all or part of the VAT on certain purchases of goods and services as the person responsible.Venture capitalEquity investment in early-stage companies with high growth potential.VERBİSThe Data Controllers' Registry Information System maintained by the Personal Data Protection Authority.Voluntary disclosureA mechanism under which no tax loss penalty is imposed if the taxpayer voluntarily corrects an incomplete or incorrect return before the tax administration discovers it.

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