Glossary

D&O

(Directors & Officers) Board Members and Senior Vice Presidents with particular responsibilities who underlie a special regime of obligation due to American law. This is also used partly in Germany. A D&O-insurance covers parts of possible fraud issues done by the above-mentioned people.

Decision rules

establish through written regulations and algorhythmen which actions should be taken in which data constellations. At most they are part of a controlling procedure within a system.

Degree of Freedom

is a measure for the decisiveness of a system. The sum of the independent parameters equals the degree of freedom.

DIIR

(Deutsches Institut für Interne Revision e.V.) The German Institute of Internal Audit

Disclosure Committee

An internal committee of an enterprise with rights for discussions and pre-decisions for all disclosure purpose of the company. It comprises annual and quarterly reporting as well as all ad-hoc-reporting. The last call for the publishing lies within the board. This committee is strongly recommended by the SEC for companies listed at the American stock exchanges. Usually the committee members are Top Managers / Vice Presidents which normally deal with disclosure items, i.e. the chief accountant, chief controller, head of investor relations, head of public relations, head of human relations as well as some heads of staff of the CEO and CFO office. Head of Audit can play a consultancy role and refer about its audits over financial reporting. He should not have a voting right as this committee is an operating one.

EFQM

(European Foundation of Quality Management) is a standardized framework for improving organizational development established by the EFQM. Only special experts trained in that area have the right to certify organisations.

Endorsement

new and modified IFRS and IFRIC have to pass a reconciliation procedure before they are binding in the EU. So the EU-instances establish and maintain their legislative power. They are empowered to control the IFRS before they are binding rules and agree upon them only when these IFRS are in accordance with the existing EU-rules and EU-interests.

Enforcement

comprises the proper application of the standards. An EU-wide consistent concept does not exist. The EU commission only demands the application of specific criteria during a year-end audit adopted in the so-called 8. EU-Rule. In Germany a dual approach is in place. With respect to two-steps enforcement the so-called “Deutsche Prüfstelle für Rechnungslegung (DPR)” acts at first in an agreement with the Ministry of Finance and the Ministry of Justice. In a second step the “BAFin” forces the companies to disclosure their defaults or to allow the DPR to audit in the company’s rooms.

Exposure draft

is a procedure in the formal process of standard setting, the due process. Thereafter as many different organisations und persons as possible should buy in the developing a new standard within the framework of the international accounting and also within the framework of the IIA. Exposure draft is the favourite – discussed and agreed upon- of the specific organisation who likes to introduce a new standard. The interesting public is asked for comments of that exposure draft. Time schedule is usually 3 months. Not until evaluation and consultation the new standard gets into life.

FA

Financial Auditing is the classical type of the 4 types of Internal Auditing FA, CO, OA, MA. It mainly deals with functions and processes within finance and accounting. Its objective is to ascertain a sound and correct external und internal reporting as well as safeguarding of assets of a company.

Feedback

analyzes deviations between the normal and actual state of a process and reports this on a regular basis, continuously or in intervals, to the controlling mechanism. This mechanism then takes actions based upon that information to reach normal level within that process.

Follow-up

is a core process in IA. During that process IA ascertain whether the agreed measures are implemented by management to serve for purpose, efficiency, effectiveness. Part of this process is also statements and proposals of the external auditors and of third parties. It should also stated whether management took actions with respect to the findings or didn’t with the consequence of bearing the risk.

Fraud

are criminal acts and also wantonly negligent acts from staff and managers to damage its own company and often unjust enrich themselves. Fraud summarizes a bundle of criminal activities including damage as well as false disclosing of material items or leaving out material items in fraudulent manner, especially in financial reporting. IA carries out its duty with the audit type compliance when a special security department is not in place.

FRC

(Financial reporting Council) the U.K. regulator for financial institutions, comp. in Germany the “BAFin”.

EWS

(Early Warning System) informs their user about a latent substantial risk in due time so that management and the board are able to react immediately when risk becomes real, and take appropriate measures to overcome or lower the risk. EWS gets their in formations from early indicators which point to the risk in an early stadium with a long lead time or which strengthen weak signals that indicate in due time disruptive changes. Each department of a company must identify the respective external and internal indicators or weak signals which are substantial for the early warning. The term EWS has been established in the German “KonTraG” and is essential for the development of a Risk Management System (RMS).

ICS

Internal Control System is a system designed, implemented, and committed by management of Control that enables an enterprise to reach its objectives against countervailing substantial risks, especially the objectives of effective and efficient corporate governance, a control of the operating processes and the IT-Systems. It constitutes of general and specific controls that could be designed as prophylactic and preventive, indicative and downstream.

IIA

(Institute of Internal Auditors, Orlando, USA) is the leading organisation of the Internal Auditors worldwide, reaching more than 140.000 members.

Impairment Test

Rule of US-GAAP as well as of IFRS. It defines that the value of all assets, material and immaterial, should be assessed on a yearly basis. Comparison between figures in the business plan with the actual, and triggering events from the competitive market play an important role in that assessment.

ISACA

(Information System Audit Control Association) international organisation for IT-Auditors, over 40.000 members worldwide.

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