Advance Fee Fraud — Falsely obtaining an advance fee for work or services not performed.

Alford Plea — Named after the Supreme Court case that upheld the practice under which a defendant pleads guilty, although continuing to assert innocence. Such a plea may be made to obtain the benefits of a plea agreement and to avoid potentially more dire consequences, such as the death penalty, if the defendant is convicted after trial.

Anti-Kickback Act of 1986 — The provisions of this act are contained in Title 41, U.S. Code, §§ 51–58). The act outlaws the giving or receiving of anything of value for the purpose of improperly obtaining or receiving favorable treatment in connection with U.S. government contracts.

Arbitration — Process whereby the dispute is submitted to an impartial third-person who then decides the outcome of the case, i.e., which party should win. The arbitrator acts as a judge or jury would by deciding the case on its merits. An arbitration can be either “binding” or “nonbinding.” If the arbitration is binding, then the decision of the arbitrator is final, and the parties cannot later submit their dispute to a judge or jury for determination.

Arraignment — Because of due process considerations, the defendant has to be brought before the court shortly after his arrest. He enters a plea at this time in a proceeding that is called an arraignment. He will be given notice of the charges against him, be informed of his rights, and, if applicable, bail will be set.

Attorney Work Product Doctrine — Under Rule 26(b)(3) of the Federal Rules of Civil Procedure, documents and tangible things which are prepared in anticipation of litigation or for a trial are protected by the work product privilege. The information may be disclosed only if the opposing party can show “substantial need” for the protected information and that the information cannot be obtained from another source. The privilege extends to information prepared by or for a party or the party’s representative including attorneys and consultants.

Attorney-Client Privilege — This privilege precludes disclosure of communications between an attorney and client, but only if the following conditions are met: (1) the client retained the attorney, (2) to provide legal advice, (3) and thereafter communicated with the attorney on a confidential basis, and, (4) has not waived the privilege.

Best Evidence Rule — Prohibits a party from testifying about the contents of a document without producing the document itself. Also known as the " original writing" rule, it requires that when a witness testifies about the contents of a document, at least a fair copy of the original must be available for inspection. If there is no original, an authenticatible copy will do.

Bid-Rigging Schemes — The acceptance or payment of bribes or kickbacks in construction contracts. Bid-rigging schemes can be categorized based on the stage of bidding at which the fraudster exerts his influence. Bid-rigging schemes usually occur in the presolicitation phase, the solicitation phase, or the submission phase of the bidding process.

Billing Schemes — Type of asset misappropriation scheme which allows the perpetrator to misappropriate company funds without ever actually handling cash or checks while at work. There are three principal types of billing schemes: false invoicing via shell companies, false invoicing via nonaccomplice vendors, and personal purchases made with company funds.

Biological Theories — Biological theories maintain that criminal behavior is not the result of choice, that is, the calculation of benefits and potential losses, but rather is caused by the physical traits of those who commit crime.

Brady Material — Exculpatory information possessed by the government. Refers to the 1963 decision by the U.S. Supreme Court in Brady v. Maryland, 373 U.S. 83. Under Brady, the prosecution must disclose all evidence requested by the defendant that is material to guilt or punishment, i.e., evidence that would tend to exculpate him or reduce his penalty. The government is expressly forbidden to conceal evidence that would call the charges into question.

Bribery — Includes official bribery, which refers to the corruption of a public official, and commercial bribery, which refers to the corruption of a private individual to gain a commercial or business advantage. The elements of official bribery vary by jurisdiction, but generally are (1) giving or receiving, (2) a thing of value, (3) to influence, (4) an official act.

Bustout — A planned bankruptcy. It can take many different forms. The basic approach is for an apparently legitimate business to order large quantities of goods on credit, then dispose of those goods through legitimate or illegitimate channels. The perpetrators then close shop, absconding with the proceeds, and leaving the suppliers unpaid.

Cash Larceny — The intentional taking away of an employer's cash (the term cash includes both currency and checks) without the consent and against the will of the employer.

Chain of Custody — Refers to (1) who has had possession of an object, and (2) what they have done with it. The chain of custody must be preserved or else the item cannot be used at trial.

Check Tampering — Type of fraudulent disbursement scheme in which the perpetrator physically prepares the fraudulent check. Usually, the perpetrator takes physical control of a check and makes it payable to himself through one of several methods. Most check tampering crimes fall into one of four categories: forged maker schemes, intercepted check schemes, concealed check schemes, and authorized maker schemes.

Chronemic Communication — Refers to the use of time in interpersonal relationships to convey meaning, attitudes, and desires. If the respondent is late in keeping an appointment, for example, this might convey a lack of interest in or avoidance of the interview.

Churning — Churning occurs when agents falsely tell customers that they can buy additional insurance for nothing by using built-up value in their current policies. In reality, the cost of the new policies frequently exceeds the value of the old ones.

Circumstantial Evidence — Evidence that tends to prove or disprove facts in issue indirectly, by inference. Many fraud cases are proved entirely by circumstantial evidence, or by a combination of circumstantial and direct evidence, but seldom by direct evidence alone. The most difficult element to prove in many fraud cases — fraudulent intent — is usually proved circumstantially, and necessarily so, because direct proof of the defendant's state of mind, absent a confession or the testimony of a co-conspirator, is impossible.

Civil Monetary Penalty Law (CMPL — The Civil Monetary Penalty Law (42 U.S.C.§1320a-7a) was passed to impose administrative sanctions against providers who defraud any federally funded program by filing false claims or other improper billing practices. Any person (including an organization, agency, or other entity, but excluding a beneficiary) that presents or causes to be presented a claim for a medical or other item or service that the person knows or should know the claim is false or fraudulent is subject to a civil monetary penalty.

Common Law — Consists of the usages and customs of a society as interpreted by the judiciary; it often is referred to as “judge-made” law.

Computer Crime — Illegal act conducted either against the computer (such as data alteration) or crimes in which the computer is an integral part of the improper act.

Computer Fraud — Any defalcation or embezzlement accomplished by tampering with computer programs, data files, operations, equipment, or media, and resulting in losses sustained by the organization whose computer system was manipulated. The distinguishing characteristic of computer fraud is that access occurs with the intent to execute a fraudulent scheme.

Computer Fraud and Abuse Act — A statute enacted in 1984, Title 18 U.S. Code, Section 1030l makes certain computer-related activity a specific federal offense. In brief, Section 1030 punishes any intentional, unauthorized access to a “protected computer” for the purpose of: obtaining restricted data regarding national security; obtaining confidential financial information; using a computer which is intended for use by the U.S. government; committing a fraud; or damaging or destroying information contained in the computer.

Computer Hacking — Prior to the newspapers using the term hacker to describe a computer criminal, the term was used to define a computer enthusiast. The term is now associated with unauthorized computer activity. Hacking or phreaking is basically the breaking into computers and telecommunications systems by learning the vulnerabilities of various hardware and software; and using a computer to systematically “guess” the telephone number, user's system identification, and password.

Computer Viruses — A computer virus is a program that contains instruction codes to attack software. Viruses are hidden computer programs that use all the computer's resources, thereby shutting down the system or slowing it down significantly. Computer viruses range from the relatively harmless (displaying a message or greeting) to shutdowns of entire computer networks for extended periods.

Computer-Assisted Crime — Use of computers instead of other means to break the law.

Conflict of Interest — Occurs when an employee, manager, or executive has an undisclosed economic or personal interest in a transaction that adversely affects that person's employer. As with other corruption frauds, conflict schemes involve the exertion of an employee's influence to the detriment of his company. In bribery schemes, fraudsters are paid to exercise their influence on behalf of a third party. Conflict cases, instead, involve self-dealing by an employee.

Corporate Fraud — Corporate fraud is any fraud perpetrated by, for, or against a business corporation. Corporate frauds can be internally generated (perpetrated by agents, employees, and executives of a corporation, for or against it, or against others) and externally generated (by others against the corporation, i.e., suppliers, vendors, customers).

COSO Report — The Committee of Sponsoring Organizations (COSO) was formed to support the implementation of the Treadway Commission findings. In 1992, the committee issued Internal Control—Integrated Framework. This report was a collaborative effort of the American Accounting Association, the American Institute of CPAs, the Financial Executives Institute, the Institute of Internal Auditors, and the Institute of Management Accountants.

Counterclaims — A claim filed by a defendant against the plaintiff in a civil suit. Popularly known as a “countersuit.”

Criteria-Based Statement Analysis — Analyzing the language used by the subject to assess its truthfulness.

Cross-Claim — An action or claim between co-parties, i.e., claims between two defendants or two plaintiffs.

Defalcation — The act of a defaulter; act of embezzling; failure to meet an obligation; misappropriation of trust funds or money held in any fiduciary capacity; failure to properly account for such funds. Commonly spoken of officers of corporations or public officials. (Black's Law Dictionary, 1990.)

Defamation — The four elements of defamation are (1) a false statement of fact, (2) tending to subject the person to whom it referred to ill will or disrepute, (3) published to one or more persons, and (4) made without privilege.

Defense — An assertion by a defendant in a criminal or civil suit that seeks to explain away guilt or civil liability for damages.

Demonstrative Evidence — A tangible item that illustrates some material proposition (e.g., a map, a chart, a summary). It differs from real evidence in that demonstrative evidence was not part of the underlying event: it was created specifically for the trial. Its purpose is to provide a visual aid for the jury.

Deposition — Sworn testimony given by a party or witness upon questioning by counsel for one of the parties before trial and outside of court, usually in a lawyer's office.

Direct Evidence — Includes testimony or other evidence that tends to prove or disprove a fact in issue directly, such as eyewitness testimony or a confession. See also Circumstantial Evidence.

Discovery — The formal process whereby the parties collect evidence and learn the details of the opposing case. Under federal rules, either party may take discovery regarding any matter, not privileged, that is relevant to the subject matter of the action, or that might lead to admissible evidence. The principal means of discovery are oral depositions, written interrogatories, and requests to produce documents.

Duty of Care — A corporate officer, director, or high-level employee, as well as other people in a fiduciary relationship, must conduct business affairs prudently with the skill and attention normally exercised by people in similar positions.

Duty of Loyalty — Requires that an employee/agent act solely in the best interest of the employer/principal, free of any self-dealing, conflicts of interest, or other abuse of the principal for personal advantage.

Economic Extortion — Economic extortion cases are the "Pay up or else...” corruption schemes; basically the flip side of bribery schemes. Instead of a vendor offering a payment to influence a decision, an employee demands that a vendor pay him in order to make a decision in that vendor's favor. If the vendor refuses to pay, he faces some harm such as a loss of business with the extorter's company.

Electronic Data Interchange — Electronic Data Interchange (EDI) is the exchange of electronic data between computers in which there is no human interaction.

Electronic Funds Transfer (EFT) — An electronic funds transfer (EFT) system is a network of operations designed to move instantaneously funds on deposit in savings and checking accounts and those funds obtained through overdraft and credit arrangements to another account or institution. (Bank Administration Manual, Bank Administration Institute.)

Embezzlement — The wrongful appropriation of money or property by a person to whom it has been lawfully entrusted. Embezzlement implicitly involves a breach of trust, although it is not necessary to show a fiduciary relationship between the parties.

Employee Polygraph Protection Act — Prohibits the use of polygraphs by most private employers unless the employer is engaged in an ongoing investigation involving economic loss or injury to the employer in the employer's business and has a reasonable suspicion that the employee is involved in the incident.

Encryption — An encryption system is comprised of a cryptographic function, which scrambles an electronic transmission, and an inverse decrypt function, which restores the transmission to its original state. Encryption hardware and software can be used to scramble any communication by utilizing a complex mathematical formula. The only way to unscramble an encrypted message is to provide the unique answer “key,” thus unlocking the message.

Evidence — Anything perceivable by the five senses, and any proof such as testimony of witnesses, records, documents, facts, data, or tangible objects legally presented at trial to prove a contention and induce a belief in the minds of a jury.

Exclusionary Rule — This rule commands that where evidence has been obtained in violation of the search and seizure protections guaranteed by the U.S. Constitution, the illegally obtained evidence cannot be used at the trial of the defendant. Under this rule, evidence which is obtained by an unreasonable search and seizure is excluded from admissibility under the Fourth Amendment, and this rule has been held to be applicable to the States. “Good faith exception” to the exclusionary rule provides that evidence is not to be suppressed under such rule where that evidence was discovered by officers acting in good faith and in reasonable, though mistaken, belief that they were authorized to take those actions. (Black's Law Dictionary, 1990.)

Expert Witness — Rule 702 of the Federal Rules of Evidence states: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.”

External Fraud Schemes — Fraud schemes that are committed by outside organizations, typically by individuals or groups of individuals against organizations.

Extortion — The obtaining of property from another with the other party's “consent” having been induced by wrongful use of actual or threatened force or fear. Fear might include the apprehension of possible economic damage or loss. A demand for a bribe or kickback also might constitute extortion.

Fair Credit Reporting Act — One of the primary statutes limiting the access to personal information is the federal Fair Credit Reporting Act (FCRA). This statute regulates the dissemination of consumer information to third parties by consumer reporting agencies. It prohibits the disclosure of any consumer credit report (the terms are defined in the statute) except in accordance with the Act. Its purpose is to regulate the activities and record keeping of mercantile credit, insurance, and employment investigation agencies and bureaus.

False Claims and Statements — Chapter 47 of Title 18, U.S. Code, contains a number of related provisions that punish false or fraudulent statements, orally or in writing, made to various federal agencies and departments. The principal statute is Section 1001 that prohibits such statements generally and overlaps with many of the more specific laws, such as Section 1014, that apply to false statements made on certain loan and credit applications.

False Imprisonment — Restraint by one person of the physical liberty of another without consent or legal justification.

False Pretenses — Illegally obtaining money, goods, or merchandise from another by fraud or misrepresentation. As a statutory crime, although defined in slightly different ways in the various jurisdictions, consists generally of these elements: (1) an intent to defraud (2) the use of false pretenses or representations regarding any existing facts, and (3) the accomplishment of the intended fraud by means of such false pretenses (People v. Johnson, 28 Mich. App. 10, 183 N.W.2d 813, 815, 816).

Fidelity Bond — A policy issued by many large insurance companies under which the insured entity is covered against losses caused by the dishonest or fraudulent acts of its employees.

Financial Statement Fraud — Fraud committed to falsify financial statements, usually committed by management, and normally involving overstating income or assets or understating liabilities or expenses.

Firewalls — Firewalls are advanced software programs which effectively “lock up” access to an Internet sight or e-mail transmission. Firewalls are designed to control the interface between a network and the Internet. This technology surveys incoming and outgoing transmissions between the network and the Internet, stopping any questionable transmission attempt to access a sensitive area.

Foreign Corrupt Practices Act — The provisions of the FCPA are found in Title 15, U.S. Code, §78m. The FCPA amended the 1934 Act to prohibit certain publicly held companies from making corrupt payments to foreign officials or political organizations. Other amendments to the Act make it illegal for any U.S. citizen to make such payments.

Forensic — Of or relating to the courts.

Fraud — Any intentional or deliberate act to deprive another of property or money by guile, deception or other unfair means.

Fraud Examination — A methodology for resolving fraud allegations from inception to disposition. More specifically, fraud examination involves obtaining evidence and taking statements, writing reports, testifying to findings, and assisting in the detection and prevention of fraud.

Fraud Theory Approach — The fraud theory approach begins with the assumption, based on the known facts, of what might have occurred. Then that assumption is tested to determine whether it is provable. The fraud theory approach involves the following steps, in the order of their occurrence: (1) analyze available data; (2) create a hypothesis; (3) test the hypothesis; (4) refine and amend the hypothesis.

Fraudulent Disbursement Schemes — Type of occupational fraud whereby an employee makes a distribution of company funds for a dishonest purpose. Examples of fraudulent disbursements include forging company checks, the submission of false invoices, doctoring timecards, and so forth.

Ghost Employee — Refers to someone on the payroll who does not actually work for the victim company. Through the falsification of personnel or payroll records a fraudster causes paychecks to be generated to a ghost. The fraudster or an accomplice then converts these paychecks. The ghost employee may be a fictitious person or a real individual who simply does not work for the victim employer. When the ghost is a real person, it is often a friend or relative of the perpetrator.

Grand Jury — Consists of 16 to 23 people sworn as jurors who meet in secret deliberation usually in biweekly or monthly sessions to hear witnesses and other evidence presented by prosecutors and to vote on indictments. An indictment or true bill must be concurred in by at least 12 jurors voting without the prosecutor present.

Horizontal Analysis — A technique for analyzing the percentage change in individual financial statement items from one year to the next. The first period in the analysis is considered the base, and the changes to subsequent periods are computed as a percentage of the base period.

Illegal Gratuities — Similar to bribery schemes, except there is not necessarily an intent to influence a particular business decision before the fact. In the typical illegal gratuities scenario, a decision is made which happens to benefit a certain person or company. The party who benefited from the decision then gives a gift to the person who made the decision. The gift could be anything of value. An illegal gratuity does not require proof of intent to influence.

Indictment — In the federal system, all offenses punishable by death must be charged by indictment; all felonies (generally crimes punishable by imprisonment for a year or more) must be prosecuted by indictment, unless the defendant waives the requirement, in which case the prosecution may proceed by the filing of an Information.

Information — A charge signed only by the prosecutor without the involvement of the grand jury. See also Indictment.

Insider Trading — Consists of using nonpublic information relating to market securities trades.

Interrogatories — Questions that are submitted to an opposing party in a lawsuit. Interrogatories cannot be given to anyone other than a party to a suit. Questions are submitted to the witness in writing. If no objection is given, then the party must answer the question in writing. All answers must be sworn to under oath.

Interview — A question-and-answer session designed to elicit information. It differs from an ordinary conversation in that the interview is structured, not free-form, and is designed for a purpose. An interview might consist of only one question or a series of questions.

Jencks Act — The Jencks Act, 18 U.S.C. §3500, permits the defendant to obtain, prior to cross-examination, a government witness' prior statements (or portions thereof) that relate to the subject matter of his testimony on direct examination. However, the statute also protects statements from discovery until after the direct examination has been completed.

Jurisdiction — Authority of a court to hear a particular type of case. A probate court, for instance, only has jurisdiction to hear cases related to wills and other probate matters. Lower trial courts (such as a justice of the peace court) may only have jurisdiction to hear matters under a certain dollar amount, e.g., cases with less than $5,000 in controversy.

Kickbacks — In the commercial sense, refers to the giving or receiving anything of value to influence a business decision without the employer's knowledge and consent.

Kinesic Interview — Type of interview methodology that is different than traditional interview methods, because the interviewer is not necessarily looking for a confession from the interview subject. Instead of searching for information from the subject, the interviewer is attempting to assess whether the subject is telling the truth. In the book The Kinesic Interview Technique, authors Frederick C. Link and D. Glen Foster define the kinesic interview technique as “[An interview technique] used for gaining information from an individual who is not willingly or intentionally disclosing it.”

Kinetic Communication — Involves the use of body movement to convey meaning. For example, a person who feels shame normally will drop the eyes to avoid the glance of another. This is not only to avoid seeing disapproval, but to conceal personal shame and confusion.

Kiting — The wrongful practice of taking advantage of the float, the time that elapses between the deposit of a check in one bank and its collection at another. Method of drawing checks by which the drawer uses funds which are not his by drawing checks against deposits which have not yet cleared through the banks. Kiting consists of writing checks against a bank account where funds are insufficient to cover them, hoping that before they are presented the necessary funds will be deposited. (Black's Law Dictionary, 1990.)

Land Flip — Practice of buying and selling real estate very quickly, often several times a day or at least within a few months. With each sale the price is increased. The sales often are transacted between related parties or with shell corporations. Their sole purpose is to increase the selling price. Ultimately, it becomes insupportable.

Larceny — The wrongful taking of money or property of another with the intent to convert or to deprive the owner of its possession and use.

Libel — Form of defamation whereby the offending material is communicated by writing or pictures as opposed to purely oral means.

Mail Fraud — The federal mail fraud statute is Title 18, U.S. Code, §1341. The gist of the offense is the use of the mails as an integral part of a scheme to defraud. The mailing does not itself need to contain the false and fraudulent representations, as long as it is an integral part of the scheme. What is integral or incidental depends on the facts of each case; generally a mailing that helps advance the scheme in any significant way will be considered sufficient.

Mediation — Process whereby an impartial third-person assists the parties in reaching a resolution of the dispute. The mediator does not decide who should win, but instead works with the parties to reach a mutually agreeable settlement.

Miranda Rights — Refers to the Supreme Court ruling in the landmark case of Miranda v. Arizona, 348 U.S. 436 (1966), that the police must give the following warnings before interrogating any suspect held in custody that (1) the suspect has the right to remain silent; (2) any statements can be used against him at trial; (3) the suspect has a right to the assistance of an attorney; and (4) an attorney will be appointed to represent the suspect if he cannot afford to retain one.

Misapplication — Wrongful taking or conversion of another's property for the benefit of someone else.

Misappropriation — The unauthorized, improper, or unlawful use of funds or other property for purpose other than that for which intended.

Misrepresentation of Material Facts — The deliberate making of false statements to induce the intended victim to part with money or property. The elements normally include (1) a material false statement; (2) knowledge of its falsity; (3) reliance on the false statement by the victim; and (4) damages suffered.

Money Laundering — The disguising of the existence, nature, source, ownership, location, and disposition of property derived from criminal activity. The “washing” of money includes all forms of illegal activities. In most instances the goal is to conduct transactions in cash (currency) in such a way as to conceal the true nature of transactions.

Multi-Level Marketing (MLM) — Use of individual sellers and a graduated payment scale to move products. Illegal MLMs use the product as a front while basing their return on new people recruited into the plan.

Net Worth — The amount by which assets exceed liabilities.

Noncompetition Agreement — An agreement whereby an employee agrees not to work for competing companies within a certain period of time after leaving.

Nondisclosure Agreement — A written agreement which provides that all proprietary, confidential, or trade secret information learned by the party in the course of business dealings must be kept confidential and must not be disclosed to any third-parties.

Norming — Sometimes referred to as calibrating, norming is the process of observing behavior before critical questions are asked, as opposed to doing so during questioning. People with truthful attitudes will answer questions one way; those with untruthful attitudes generally will answer them differently.

Occupational Fraud and Abuse — The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets. Simply stated, occupational frauds are those in which an employee, manager, officer, or owner of an organization commits fraud to the detriment of that organization. The three major types of occupational fraud are Corruption, Asset Misappropriation, and Fraudulent Statements (which include financial statement schemes).

Off-Book Frauds — Involves vendor and vendor employees engaging in bribes, scams, kickbacks, conflicts of interest, bribery, and corruption. Detected by means of tips or complaints from sources either inside or outside the company.

On-Book Frauds — Involves employees manipulating accounting records. Detected by means of basic audit tests in high-risk areas using original source documents.

Oversight Committee — An oversight committee should be established to review uniformity in decision making. Further, it should act as a tribunal for the presentation of additional information to change or assist management in making appropriate decisions regarding fraud investigations.

Paralinguistic Communication — Involves the use of volume, pitch, and voice quality to convey meaning. One of the basic differences between written and verbal communication is that oral speech gives the full range of nonverbal accompaniment. For example, a “no” answer might not really mean no; it depends on the way in which the “no” is said.

Parol Evidence — Oral or verbal evidence; that which is given by word of mouth; the ordinary kind of evidence given by witnesses in court. (Black's Law Dictionary, 1990.)

Parol Evidence Rule — This evidence rule seeks to preserve integrity of written agreements by refusing to permit contracting parties to attempt to alter import of their contract through use of contemporaneous oral declarations. (Black's Law Dictionary, 1990.)

Ponzi Scheme — The term Ponzi refers to illegal operations which use financial instruments of some sort to extract money from victims; there are few or no actual investments being made, just funds passing up a ladder.

Privacy Act of 1974 — Restricts information about individuals, both employees and non-employees, that might be gathered by government agencies. This information might include a person's education, finances, medical history, criminal history, employment history, and identifying information (fingerprint, voice print, or photograph). The employee might have access to the information unless it is investigatory material compiled for law enforcement purposes, statistical records, or material compiled solely for determining suitability, eligibility, or qualification for federal service or promotion.

Probable Cause — Reasonable cause; having more evidence for than against. A reasonable ground for belief in certain alleged facts. A set of probabilities grounded in the factual and practical considerations which govern the decisions of reasonable and prudent persons and is more than mere suspicion but less than the quantum of evidence required for conviction. (Black's Law Dictionary, 1990.)

Proxemic Communication — Use of interpersonal space to convey meaning. The relationship between the interviewer and respondent is both a cause and effect of proxemic behavior. If the distance between the interviewer and the respondent is greater, there is more of a tendency for them to watch each other's eyes for clues to meaning.

Psychological Theories — Refers to theories of behavior rooted in psychology and which are based on the view that criminal behavior is the product of mental processes.

Pyramid Scheme — A scheme in which a buyer or participant is promised a payment for each additional buyer or participant recruited by that person.

Qui Tam Suit — A qui tam suit is one in which a private individual sues on behalf of the government to recover damages for criminal or fraudulent actions committed against the government. It is a civil not a criminal suit. Most qui tam actions are brought under the False Claims Act, 31 USC §3729 et seq.

Racketeer Influenced and Corrupt Organizations Act (RICO) — Title 18, U.S. Code, §1961, et. seq. The statute outlaws the investment of ill-gotten gains in another business enterprise; the acquisition of an interest in an enterprise through certain illegal acts; and the conduct of the affairs of an enterprise through such acts. Criminal penalties include stiff fines and prison terms as well as the forfeiture of all illegal proceeds or interests. Civil remedies include treble damages, attorney fees, dissolution of the offending enterprise, and other penalties.

Ratio Analysis — A means of measuring the relationship between two different financial statement amounts. The relationship and comparison are the keys to the analysis.

Real Evidence — Refers to physical objects which may be introduced as evidence at a legal proceeding. A canceled check, an invoice, a ledger, letters and documents are real evidence, but the term includes any physical evidence.

Relevant Evidence — Rule 401 of the Federal Rules of Evidence defines relevant evidence as evidence “having any tendency to make the existence of any fact that is of consequence to determination of the action more probable or less probable than it would be without the evidence.” In other words, relevant evidence is evidence that tends to prove or disprove a fact in issue.

Routine Activities Theory — A variation of classical theory, this theory holds that both the motivation to commit crime and the supply of offenders is constant. There always will be a certain number of people motivated by greed, lust, and other forces inclining toward lawbreaking.

Search Warrants — Issued by a judge upon presentation of probable cause to believe the records are being used or have been used in the commission of a crime. An affidavit usually is used to support the request for the search warrant. The affidavit must describe in detail the reason(s) the warrant is requested, along with the place the evidence is thought to be kept. Courts cannot issue search warrants without sufficient cause; the Fourth Amendment to the Constitution protects individuals against unreasonable searches and seizures.

Sentencing Guidelines — The Sentencing Reform Act of 1984 provided for the development of guidelines for the sentencing of individual and organizational offenders. The individual guidelines became effective in 1987, and the guidelines for organizations in 1991.

Shell Companies — Fictitious business entities created for the sole purpose of committing fraud. They may be nothing more than a fabricated name and a post office box that an employee uses to collect disbursements from false billings.

Skimming — Removal of cash from a victim entity prior to its entry in an accounting system. Employees who skim from their companies steal sales or receivables before they are recorded in the company books. Skimming schemes are known as “off-book” frauds, meaning money is stolen before it is recorded in the victim organization's accounts.

Sliding — Sliding is the term used for including additional coverages in the insurance policy without the knowledge of the insured. The extra charges are hidden in the total premium and since the insured is unaware of the coverage, few claims are ever filed. For example, motor club memberships, accidental death, and travel accident coverages can usually be slipped into the policy without the knowledge of the insured.

Social Control Theory — Travis Hirschi, in his 1969 book, Causes of Delinquency, first articulated the social control theory. Essentially, control theory argues that the institutions of the social system train and press those with whom they are in contact into patterns of conformity. The theory rests on the thesis that to the extent a person fails to become attached to the variety of control agencies of the society, his/her chances of violating the law are increased.

Social Learning Theories — These theories hold that criminal behavior is a function of the way people absorb information, viewpoints, and motivations from others, most notably from those to whom they are close, such as members of their peer group. Social learning theorists believe that all people have the potential to commit crime if they are exposed to certain kinds of circumstances.

Social Process Theories — These theories hold that criminality is a function of individual socialization and the social-psychological interactions people have with the various organizations, institutions, and processes of society. Though they differ in many respects, the various social process theories all share one basic concept: all people regardless of their race, class, or gender, have the potential to become delinquents or criminals.

Social Structure Theories — Theories of criminology that concentrate on the kinds of societies that generate particular levels of crime, for example, why is crime so low in Japan and so high in the United States? Such theorists argue that people living in equivalent social environments seem to behave in a similar, predictable fashion.

Subpoena Duces Tecum — A legal order requiring the production of documents.

Suspicious Activity Reports — Effective April 1, 1996, the Office of the Comptroller of the Currency (OCC) requires national banks to submit a Suspicious Activity Report (SAR) under certain circumstances (12 C.F.R. §21.11, as amended). Reports are required if there is a known or suspected criminal violation committed against the bank or involving a transaction conducted through the bank.

Tax Fraud — "… the actual intentional wrongdoing, and the intent required …to evade a tax believed to be owing. Fraud implies bad faith, intentional wrongdoing, and a sinister motive. It is never imputed or presumed and the courts will not sustain findings of fraud upon circumstances which at most create only suspicion. 14 Mertens, Law of Federal Income Taxation, sec. 55.21, page 64, (1991 Rev); Ross Glove Co. v. Commissioner, 60 TC 569 (1973).

Telemarketing Fraud — Used to refer to fraud schemes which are perpetrated over the telephone; most often consists of calls by the telemarketer to the victim to deceive the victim into purchasing goods or services.

Trade Secret — Includes secret formulas and processes, but also any other proprietary information, such as customer and price lists, sales figures, business plans, or any other confidential information that has a value to the business and would be potentially harmful if disclosed.

Treadway Commission — The National Commission on Fraudulent Financial Reporting (commonly known as the Treadway Commission) was established in 1987 with the purpose of defining the responsibility of the auditor in preventing and detecting fraud. The commission was formed by the major professional auditing organizations – the American Institute of Certified Public Accountants, the Institute of Internal Auditors, and the National Association of Accountants.

Trespass — The unauthorized, intentional or negligent entry upon the property of others. A claim of trespass might arise from a search of an employee's locker. It is particularly applicable to surveillance at an employee's home.

Twisting — Twisting is the replacement, usually by high pressure sales techniques, of existing policies for new ones. The primary reason, of course, is for the agent to profit since first year sales commissions are much higher than commissions for existing policies.

Uniform Commercial Code Filings — In order to obtain a perfected security interest in personal property, a lender must file a Uniform Commercial Code (UCC) statement with the Secretary of State or the county. Banks, finance companies and other lenders will generate records or recorded filings of financial transactions conducted with individuals and businesses, such as purchases of household furniture, appliances, boats and yachts, automobiles, aircraft, and business equipment.

Uniform Crime Reports — The Federal Bureau of Investigation (FBI) compiles statistics on the extent of crime in the United States in a document called the Uniform Crime Report (UCR). The report is put together on the basis of information voluntarily submitted by more than l5,000 law enforcement departments. This includes virtually every significant public policing agency in the country.

Venue — The geographical area covered by the court. A trial court in Dallas County, Texas, for example, can only hear cases which have some connection with either parties or events that occurred in that county. Venue is technically an element of the court's jurisdiction.

Vertical Analysis — A technique for analyzing the relationships between the items on an income statement, balance sheet, or statement of cash flows by expressing components as percentages.

Whistleblower — Employees who report illegal or unethical conduct of their employers. Federal law and many state laws provide, in some instances, protection to employees who report improper or illegal acts to government authorities. Most of these laws protect the employee from any adverse employment action or retaliatory action from the employer.

Wire Fraud — The federal wire fraud statute is Title 18, U.S. Code, §1343. It prohibits transmission “by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice.” The wire fraud statute often is used in tandem with mail fraud counts in federal prosecutions. Unlike mail fraud, however, the wire fraud statute requires an interstate or foreign communication for a violation.

Yellow Book Standards — Standards for audits of government organizations, programs, activities, and functions, and of government assistance received by contractors, nonprofit organizations, and other nongovernment organizations developed by the Comptroller General of the United States, General Accounting Office (GAO). These standards are by and large taken from generally accepted accounting principles. However, Government Auditing Standards also known as the Yellow Book, go beyond the AICPA standards. Generally accepted government auditing standards (GAGAS) are to be followed by auditors and audit organizations when required by law, regulation, agreement, contract, or policy.

Note

Accounting and Auditing Practice — A practice that performs engagements covered by QC Section 10, A Firm's System of Quality Control (Redrafted), which are audit, attestation, compilation, review, and any other services for which standards have been promulgated by the AICPA Auditing Standards Board (ASB) or the AICPA Accounting and Review Services Committee (ARSC) under the General Standards Rule (ET Sec. 1.300.01 and ET Sec. 2.300.01), or the Compliance With Standards Rule (ET Sec. 1.310.001 and ET Sec. 2.310.001), of the AICPA Code of Professional Conduct. Although standards for other engagements may be promulgated by other AICPA technical committees, engagements performed in accordance with those standards are not encompassed in the definition of an accounting and auditing practice.

Accounting Records — The records of initial accounting entries and supporting records, such as checks and records of electronic fund transfers; invoices; contracts; the general and subsidiary ledgers; journal entries and other adjustments to the financial statements that are not reflected in journal entries; and records, such as work sheets and spreadsheets, supporting cost allocations, computations, reconciliations, and disclosures.

Analytical Procedures — Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data. Analytical procedures also encompass such investigation, as is necessary, of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount. The use of analytical procedures as risk assessment procedures may be referred to as analytical procedures used to plan the audit. The auditor's use of analytical procedures as substantive procedures is referred to as substantive analytical procedures.

Applicable Financial Reporting Framework — The financial reporting framework adopted by management and, when appropriate, those charged with governance in the preparation and fair presentation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation. The term also means the financial reporting framework that applies to the group financial statements.

Assertions — Representations by management, explicit or otherwise, that are embodied in the financial statements as used by the auditor to consider the different types of potential misstatements that may occur.

Audit Documentation — The record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached (terms such as working papers or workpapers are also sometimes used).

Audit Evidence — Information used by the auditor in arriving at the conclusions on which the auditor's opinion is based. Audit evidence includes both information contained in the accounting records underlying the financial statements and other information. Sufficiency of audit evidence is the measure of the quantity of audit evidence. The quantity of the audit evidence needed is affected by the auditor's assessment of the risks of material misstatement and also by the quality of such audit evidence. Appropriateness of audit evidence is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor's opinion is based.

Audit Risk — The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of the risks of material misstatement and detection risk. Audit risk does not include the risk that the auditor might express an opinion that the financial statements are materially misstated when they are not. This risk is ordinarily insignificant. Further, audit risk is a technical term related to the process of auditing; it does not refer to the auditor's business risks, such as loss from litigation, adverse publicity, or other events arising in connection with the audit of financial statements.

Audited Financial Statements — In the context of Section 560, Subsequent Events and Subsequently Discovered Facts, reference to audited financial statements means the financial statements, together with the auditor's report thereon. In the context of Section 810, the term refers to those financial statements audited by the auditor in accordance with GAAS and from which the summary financial statements are derived.

Auditor — The term used to refer to the person or persons conducting the audit, usually the engagement partner or other members of the engagement team, or, as applicable, the firm. When an AU-C section expressly intends that a requirement or responsibility be fulfilled by the engagement partner, the term engagement partner rather than auditor is used. Engagement partner and firm are to be read as referring to their governmental equivalents when relevant.

Cash Basis — A basis of accounting that the entity uses to record cash receipts and disbursements and modifications of the cash basis having substantial support (for example, recording depreciation on fixed assets).

Component — An entity or business activity for which group or component management prepares financial information that is required by the applicable financial reporting framework to be included in the group financial statements.In the context of Section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), an investment accounted for under the equity method constitutes a component. Investments accounted for under the cost method may be analogous to a component when the work and reports of other auditors constitute a major element of evidence for such investments.

Component Auditor — An auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit. A component auditor may be part of the group engagement partner's firm, a network firm of the group engagement partner's firm, or another firm. In the context of Section 600, auditors who do not meet the definition of a member of the group engagement team are considered to be component auditors. However, an auditor who performs work on a component when the group engagement team will not use that work to provide audit evidence for the group audit is not considered a component auditor.

Component Management — Management responsible for preparing the financial information of a component.

Component Materiality — The materiality for a component determined by the group engagement team for the purposes of the group audit.

Components of Internal Control — The following five components, which provide a useful framework for auditors when considering how different aspects of an entity's internal control may affect the audit:

Consolidation Process — Reference to the consolidation process includes the following:

Contractual Basis — A basis of accounting that the entity uses to comply with an agreement between the entity and one or more third parties other than the auditor.

Control Risk — The risk that a misstatement that could occur in an assertion about a class of transaction, account balance, or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.

Detection Risk — The risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements.

Emphasis-of-Matter Paragraph — A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor's professional judgment, is of such importance that it is fundamental to users' understanding of the financial statements.

Engagement Documentation — The record of the work performed, results obtained, and conclusions that the practitioner reached (also known as working papers or workpapers).

Engagement Partner — The partner or other person in the firm who is responsible for the audit engagement and its performance and for the auditor's report that is issued on behalf of the firm and who, when required, has the appropriate authority from a professional, legal, or regulatory body. Engagement partner, partner, and firm refer to their governmental equivalents where relevant.

Engagement Team — All partners and staff performing the engagement and any individuals engaged by the firm or a network firm who perform audit procedures on the engagement. This excludes an auditor's external specialist engaged by the firm or a network firm.

Financial Reporting Framework — A set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements; for example, U.S. GAAP, International Financial Reporting Standards promulgated by the International Accounting Standards Board, or a special purpose framework. The term fair presentation framework is used to refer to a financial reporting framework that requires compliance with the requirements of the framework and

Financial Statements — A structured representation of historical financial information, including related notes, intended to communicate an entity's economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information. The term financial statements ordinarily refers to a complete set of financial statements as determined by the requirements of the applicable financial reporting framework, but can also refer to a single financial statement. In the context of Section 700, reference to financial statements means a complete set of general purpose financial statements, including the related notes. In the context of Section 800, reference to financial statements means a complete set of special purpose financial statements, including the related notes.

Firm — A form of organization permitted by law or regulation whose characteristics conform to resolutions of the Council of the AICPA and that is engaged in the practice of public accounting.

Fraud — An intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception that results in a misstatement in financial statements that are the subject of an audit.Although fraud is a broad legal concept, the auditor is primarily concerned with fraud that causes a material misstatement in the financial statements.

Fraud Risk Factors — Events or conditions that indicate an incentive or pressure to perpetrate fraud, provide an opportunity to commit fraud, or indicate attitudes or rationalizations to justify a fraudulent action.

Generally Accepted Accounting Principles (GAAP) — Reference to generally accepted accounting principles in GAAS means generally accepted accounting principles promulgated by bodies designated by the Council of the AICPA pursuant to the General Standards Rule and the Compliance With Standards Rule of the AICPA Code of Professional Conduct.

Generally Accepted Auditing Standards (GAAS) — Statements on Auditing Standards issued by the ASB, the senior technical body of the AICPA designated to issue pronouncements on auditing matter for nonissuers. The General Standards Rule of the AICPA Code of Professional Conduct requires an AICPA member who performs an audit of a nonissuer to comply with standards promulgated by the ASB.

Governmental Entities — This term includes nongovernmental entities that receive government awards.

Group — All the components whose financial information is included in the group financial statements. A group always has more than one component.

Group Audit — The audit of group financial statements.

Group Audit Opinion — The audit opinion on the group financial statements.

Group Engagement Partner — The partner or other person in the firm who is responsible for the group audit engagement and its performance and for the auditor's report on the group financial statements that is issued on behalf of the firm. When joint auditors conduct the group audit, the joint engagement partners and their engagement teams collectively constitute the group engagement partner and the group engagement team. Group engagement partner and firm refer to their governmental equivalents when relevant.

Group Engagement Team — Partners, including the group engagement partner, and staff who establish the overall group audit strategy, communicate with component auditors, perform work on the consolidation process, and evaluate the conclusions drawn from the audit evidence as the basis for forming an opinion on the group financial statements.

Group Financial Statements — Financial statements that include the financial information of more than one component. The term also refers to combined financial statements aggregating the financial information prepared by components that are under common control.

Group Management — Management responsible for the preparation and fair presentation of the group financial statements.

Group-Wide Controls — Controls designed, implemented, and maintained by group management over group financial reporting.

Independence — Defined as:

Inherent Risk — The susceptibility of an assertion about a class of transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.

Initial Audit Engagement — An engagement in which either (a) the financial statements for the prior period were not audited, or (b) the financial statements for the prior period were audited by a predecessor auditor.

Internal Control — A process effected by those charged with governance, management, and other personnel that is designed to provide reasonable assurance about the achievement of the entity's objectives with regard to the reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations.

Limitation on the Scope of an Audit — The auditor's inability to obtain sufficient appropriate audit evidence, which may arise from the following:

Management — The person(s) with executive responsibility for the conduct of the entity's operations. For some entities, management includes some or all of those charged with governance; for example, executive members of a governance board or an owner-manager.

Material Weakness — A deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis.

Misstatement — A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be presented fairly in accordance with the applicable financial reporting framework. Misstatements can arise from fraud or error. Misstatements also include those adjustments of amounts, classifications, presentations, or disclosures that, in the auditor's professional judgment, are necessary for the financial statements to be presented fairly, in all material respects.

Modified Opinion — A qualified opinion, an adverse opinion, or a disclaimer of opinion.

Network — An association of entities, as defined in ET Section 0.400, Definitions.

Network Firm — A firm or other entity that belongs to a network, as defined in ET Section 0.400.

Other-Matter Paragraph — A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's professional judgment, is relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report.

Partner — Any individual with authority to bind the firm with respect to the performance of a professional services engagement. For purposes of this definition, partner may include an employee with this authority who has not assumed the risks and benefits of ownership. Firms may use different titles to refer to individuals with this authority.

Performance Materiality — The amount or amounts set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. If applicable, the term also refers to the amount or amounts set by the auditor at less than the materiality level or levels for particular classes of transactions, account balances, or disclosures. Performance materiality is to be distinguished from tolerable misstatement.

Preconditions for an Audit — The use by management of an acceptable financial reporting framework in the preparation and fair presentation of the financial statements and the agreement of management and, when appropriate, those charged with governance, to the premise on which an audit is conducted.

Predecessor Auditor — The auditor from a different audit firm who has reported on the most recent audited financial statements or was engaged to perform but did not complete an audit of the financial statements.

Presumptively Mandatory Requirements — The category of professional requirements with which the auditor must comply in all cases in which such a requirement is relevant, except in rare circumstances discussed in Section 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards. GAAS use the word “should” to indicate a presumptively mandatory requirement.

Professional Judgment — The application of relevant training, knowledge, and experience, within the context provided by auditing, accounting, and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.

Professional Skepticism — An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.

Professional Standards — Standards promulgated by the ASB or the ARSC under the General Standards Rule or the Compliance With Standards of the AICPA Code of Professional Conduct, or other standards-setting bodies that set auditing and attest standards applicable to the engagement being performed and relevant ethical requirements.

Reasonable Assurance — In the context of an audit of financial statements, a high, but not absolute, level of assurance.

Regulatory Basis — A basis of accounting that the entity uses to comply with the requirements or financial reporting provisions of a regulatory agency to whose jurisdiction the entity is subject (for example, a basis of accounting that insurance companies use pursuant to the accounting practices prescribed or permitted by a state insurance commission).

Relevant Assertion — A financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated. The determination of whether an assertion is a relevant assertion is made without regard to the effect of internal controls.

Relevant Ethical Requirements — Ethical requirements to which the engagement team and engagement quality control reviewer are subject, which consist of the AICPA Code of Professional Conduct together with rules of applicable state boards of accountancy and applicable regulatory agencies that are more restrictive.

Report Release Date — The date the auditor grants the entity permission to use the auditor's report in connection with the financial statements.

Risk Assessment Procedures — The audit procedures performed to obtain an understanding of the entity and its environment, including the entity's internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and relevant assertion levels.

Risk of Material Misstatement — The risk that the financial statements are materially misstated prior to the audit. This consists of two components; inherent risk and control risk.

Risk of Material Misstatement at the Overall Financial Statement Level — Refers to risks of material misstatement that relate pervasively to the financial statements as a whole and potentially affect many assertions.

Significant Component — A component identified by the group engagement team (a) that is of individual financial significance to the group, or (b) that, due to its specific nature or circumstances, is likely to include significant risks of material misstatement of the group financial statements.

Significant Deficiency — A deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance.

Significant Risk — An identified and assessed risk of material misstatement that, in the auditor's professional judgment, requires special audit consideration.

Special Purpose Financial Statements — Financial statements prepared in accordance with a special purpose framework.

Special Purpose Framework — A financial reporting framework other than GAAP that is one of the following bases of accounting; cash basis, tax basis, regulatory basis, or contractual basis, commonly referred to as other comprehensive bases of accounting.

Subsequent Events — Events occurring between the date of the financial statements and the date of the auditor's report.

Substantive Procedure — An audit procedure designed to detect material misstatements at the assertion level. Substantive procedures comprise

Sufficiency (of Audit Evidence) — The measure of the quantity of audit evidence. The quantity of the audit evidence needed is affected by the auditor's assessment of the risks of material misstatement and also by the quality of such audit evidence.

Tax Basis — A basis of accounting that the entity uses to file its income tax return for the period covered by the financial statements.

Test of Controls — An audit procedure designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

Those Charged With Governance — The person(s) or organization(s) (for example, a corporate trustee) with responsibility for overseeing the strategic direction of the entity and the obligations related to the accountability of the entity. This includes overseeing the financial reporting process. Those charged with governance may include management personnel; for example, executive members of a governance board or an owner-manager.

Tolerable Misstatement — A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population.

Uncorrected Misstatements — Misstatements that the auditor has accumulated during the audit and that have not been corrected.

Understanding of the Entity — Obtaining an understanding of the entity and its environment, including the entity's internal control.

Unmodified Opinion — The opinion expressed by the auditor when the auditor concludes that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Written Representation — A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. Written representations in this context do not include financial statements, the assertions therein, or supporting books and records.