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Wealth Dictionary
Buy Stop Order
A buy stop order is an instruction to purchase a security when its price surpasses a specified level, often used to enter a trade at a higher price in anticipation of further price increases.
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Related Terms
Audit
An audit is a systematic examination of a company's financial records to ensure accuracy, transparency, and compliance. It is conducted by independent auditors to ensure the accuracy, transparency, and compliance of the company's financial statements with accounting standards, regulatory requirements, and industry practices. During an audit, auditors review various financial documents, including balance sheets, income statements, cash flow statements, and supporting documentation such as invoices, receipts, and bank statements. They verify the accuracy and completeness of the financial information presented in these records, ensuring that it fairly represents the company's financial position and performance. In addition to reviewing financial records, auditors assess the effectiveness of the company's internal controls and risk management processes. They evaluate the reliability and integrity of the company's financial reporting systems, identifying any weaknesses or deficiencies that may increase the risk of errors, fraud, or non-compliance. The primary objectives of an audit are to provide assurance to stakeholders, including investors, creditors, regulators, and the general public, regarding the reliability and integrity of the company's financial statements. By independently verifying the accuracy and completeness of the financial information presented, audits enhance transparency and trust in the company's financial reporting.
Accrual Basis
Accrual basis accounting recognizes revenue and expenses when they are earned or incurred, regardless of cash flow. It provides a more accurate picture of a company's financial position than cash basis accounting. By recording revenues when they are earned (regardless of when payment is received) and expenses when they are incurred (regardless of when they are paid), accrual accounting provides a more precise representation of the company's financial activities and health. One significant advantage of accrual basis accounting is its ability to match revenues with corresponding expenses in the same accounting period. This matching principle ensures that the income statement reflects the true profitability of the business during a specific period. For example, if a company provides services in December but does not receive payment until January of the following year, accrual accounting recognizes the revenue in December when the services were rendered.