Financial Audit Glossary

A

Accountability relationship
The obligation of government to inform elected officials and the public on how it spent taxpayer dollars to deliver programs and services.
Accounts receivable
Financial claims arising from amounts owed to the Government of Canada: for example, for the use of its assets or from the proceeds for provision of services.
Allowance for doubtful accounts
Management’s estimate of the amount of accounts receivable that is unlikely to be paid. It reduces the amount of accounts receivable in the financial statements.
Annual report
A document prepared annually that informs the public of an organization’s operations, financial results, and financial position as set out in its financial statements.
Appropriation acts
Acts that are passed by Parliament to authorize the government to spend public monies. In appropriation acts, schedules set out votes that authorize the amounts of funding required by the government for particular activities or programs.
Asset retirement obligations
A legal obligation associated with the retirement of a tangible capital asset.
Audit opinion
An opinion expressed by an auditor as to whether the financial statements gave a fair presentation of the underlying transactions and events according to accounting requirements.

B

Bond rate
Yield of a long-term bond, which generally has more than 10 years to maturity.
Budget
A document prepared by the Department of Finance Canada that sets out the Government of Canada’s annual economic agenda for Canada.
Budgetary expenditures
The largest portion of the government’s expenditures, including operating and capital expenditures; transfer payments to other levels of government, individuals, and organizations; public debt charges; and payments to Crown corporations.
Budgetary measures
Government transactions that affect the surplus or deficit of the Government of Canada. These transactions are presented in the government’s main and supplementary estimates.

C

Capital markets
Financial markets where buyers and sellers trade stocks, bonds, currencies, and other financial assets.
Central agency
An organization that works across government in a central coordinating role to ensure policy coherence and coordination. Central agencies may have either formal or informal authority over other federal organizations. In this report, we use the term to refer to the Privy Council Office, the Treasury Board of Canada Secretariat, the Receiver General for Canada, and the Department of Finance Canada.
Consolidated Revenue Fund
The general pool of income of the federal government. All money received by the federal government must be credited to this fund and properly accounted for.
Contingent liabilities
Potential debt that may become an actual financial obligation if certain events occur or fail to occur.
Credit facility
A type of loan made in a business or corporate finance context that allows the borrower to take out money over an extended period of time rather than reapplying for a loan each time it needs money.

D

Defined benefit pension plan
A type of pension plan that promises a certain level of pension, which is usually based on the plan member’s salary and years of service.
Departmental performance reports
Individual department and agency accounts of results achieved against performance expectations. The reports cover the most recent fiscal year and are normally tabled in Parliament in the fall.
Direct program spending
The portion of total budgetary spending that includes operating and capital spending and grants and contributions but excludes public debt charges and major transfers to persons and to other levels of government (as specified in the Public Accounts).
Discount rate
The rate used by the Government of Canada to estimate the value, in today’s dollars, of its long-term liabilities.

E

Emphasis of matter paragraph
A paragraph in an independent auditor’s report to draw the attention of users of financial statements to a matter that has been presented or disclosed in the financial statements, when, in the auditor’s judgment, the matter is of such importance that it is fundamental to users’ understanding of the financial statements.
Enterprise Crown corporation
A Crown corporation that is not dependent on parliamentary appropriations and whose principal source of revenue is the sale of goods and services to outside parties.

F

Fairly presented
The characteristic of information in financial statements that faithfully represents the underlying transactions and events.
Financial audit
An examination as to whether the numbers presented in financial statements, or other financial information, are reasonably accurate. It is not designed to examine each dollar received or spent, to identify instances of fraud or wrongdoing, or to assess the merits of government policy decisions.
Financial instruments
Contracts that give rise to financial assets on the part of one organization and financial liabilities or equity instruments on the part of another organization.
Financial statements
A representation of a government organization’s financial position and financial performance. Financial statements include the notes and schedules (such as tables) supporting the statements.
Financial statements discussion and analysis
A section of an entity’s annual financial report that explains the significant items and transactions presented in the entity’s financial statements, as well as variances and trends.
Fiscal measures
Changes to tax rates and rules to achieve policy objectives.

G

Government business enterprise
A government organization that can, in the normal course of its operations, maintain its operations and meet its liabilities from revenues from outside sources.
Governor in Council
The Governor General, acting on the advice of Cabinet, as the formal executive body that gives legal effect to those decisions of Cabinet that are to have the force of law.
Government of Canada’s consolidated financial statements
A presentation of the financial statements of the Government of Canada and all organizations it controls. These statements are in Volume I of the Public Accounts of Canada.
Green bonds
A debt security that is issued to raise capital specifically to support projects that are related to the climate or the environment.

H

HR-to-pay process
The process from hiring an employee and entering the employee’s pay data into the human resource system up to and including issuing payment and recording the employee’s pay expense in the financial statements.

I

Independent auditor’s report
A report attached to the front of an organization’s financial statements to show that they have been scrutinized by an independent auditor. It contains, among other things, the written opinion of the auditor of whether the statements meet accepted accounting principles. The report is written in a standard format as mandated by generally accepted auditing standards.
Interim Estimates
A document prepared annually by the Treasury Board of Canada Secretariat before the start of the fiscal year that outlines the government’s planned spending for the first 3 months of the next fiscal year.
Internal control
An activity designed to mitigate risks and provide reasonable assurance that an organization’s objectives, including compliance with applicable laws, regulations, and policies, will be achieved.

L

Leave with income averaging arrangement
A special work arrangement that allows employees to take an extended leave without pay (for a minimum of 5 weeks and a maximum of 3 months) while averaging their income over a 12-month period. This income averaging allows them to continue receiving part of their regular salary during their leave without pay.
Liquidity
The ease with which an asset, or security, can be converted into ready cash without affecting its market price.
Listed entities
Entities whose shares, stock, or debt are quoted or listed on a recognized stock exchange or are marketed under the regulations of a recognized stock exchange or other equivalent body.

M

Macro-prudential measures
Financial policies aimed at ensuring the stability of the financial system as a whole to prevent substantial disruptions in credit and other vital financial services necessary for stable economic growth.
Main Estimates
A document prepared annually by the Treasury Board of Canada Secretariat that outlines how the government plans to spend public funds for the coming fiscal year. It is presented to the House of Commons for approval.
Management letter
A letter that identifies opportunities for changes in procedures to improve an organization’s systems of internal control, streamline its operations and/or enhance its financial reporting practices.
Material
The characteristic of information in financial statements that could reasonably be expected to influence the economic decisions of users of those financial statements.
Material errors
Errors or omissions in the financial statements that could reasonably be expected to influence the economic decisions of users of those financial statements.
Monetary policy
Actions undertaken by a nation’s central bank to achieve desired objectives. The objective of the Bank of Canada’s monetary policy is to preserve the value of money by keeping inflation low, stable, and predictable.

N

Non-budgetary expenditures
Changes in the composition of the financial assets of the government, including loans, investments, and advances.
Non-budgetary measures
Government loans, investments, and advances that affect the financial position of the Government of Canada but do not affect its surplus or deficit. These loans, investments, and advances are presented in the government’s main and supplementary estimates.

P

Pay action requests
Anything from a request to change an employee’s address or bank account information, to a request to enter parental leave or a promotion, or a request to fix a pay error.
Pay process
The process from the hiring of an employee and entering the employee’s pay data into the human resource system up to and including issuance of payment and recording the employee’s pay expense in the financial statements.
Pension liability
The amounts a pension fund must account for to meet its obligations for future pension payments.
Performance audit
An audit that seeks to determine whether government programs are being managed with due regard for economy, efficiency, and environmental impact and whether measures are in place to determine their effectiveness.
Policy interest rate
The Bank of Canada’s target for the overnight rate, which is the interest rate at which major financial institutions borrow and lend 1‑day (or overnight) funds among themselves.
Post-payment verification
Confirmation of eligibility and accuracy after a benefit has been paid.
Public Accounts of Canada
The government’s annual report, in 3 volumes, that includes the audited consolidated financial statements of the Government of Canada and other unaudited financial information, such as the financial statements discussion and analysis and supporting tables.

S

Special examination
A type of performance audit of Crown corporations that assesses a corporation’s systems and practices and helps strengthen corporate accountability.
Statutory spending
Expenditures authorized under specific legislation. As they are already approved by statute, they do not require further approval. Over 60% of government spending is statutory.
Subsequent event
An event that occurs after an organization’s fiscal year-end but before financial statements are issued. The event may provide additional information relating to items included in the financial statements and may reveal conditions existing at the fiscal year-end that affect the estimates involved in the preparation of financial statements.
Supplementary Estimates
The documents that identify the spending authorities (votes) and amounts and adjustments not included in the Main Estimates. Parliamentary approval is required to enable the government to proceed with its spending plans.

T

Tangible capital assets
Non-financial assets with physical substance that are acquired, constructed, or developed and are intended to be used on a continuing basis. Their useful life typically extends beyond an accounting period.
Transparency
A value that ensures information is provided to the public and interested parties in a timely manner that facilitates public scrutiny.

U

Unfunded pension liabilities
Liabilities of the government to pay for pension benefits for which there is no separate fund allocated.
Unmatured debt
Debt of the Government of Canada issued on the credit markets, and other obligations, that has not yet become due. Unmatured debt includes marketable bonds, treasury bills, retail debt, foreign-currency-denominated debt, and obligations related to capital leases and public–private partnerships.
Unmodified audit opinion
An opinion expressed by an auditor when the auditor concludes that the financial statements gave a fair presentation of the underlying transactions and events according to accounting requirements.

V

Voted spending
Expenditures voted by Parliament annually for a federal department or agency in a particular expenditure category, such as operations, capital, or grants.