Local Government: 2015–16 Audit Snapshot

Tabled: 24 November 2016

Appendix F. Glossary

Asset

An item or resource controlled by an entity that will be used to generate future economic benefits.

Audit Act 1994

Victorian legislation establishing the Auditor-General's operating powers and responsibilities and detailing the nature and scope of audits that the Auditor-General may carry out.

Audit opinion

A written expression, within a specified framework, indicating the auditor's overall conclusion about a financial (or performance) report based on audit evidence.

Capital expenditure

Money an entity spends on:

  • new physical assets, including buildings, infrastructure, plant and equipment
  • renewing existing physical assets to extend the service potential or life of the asset.

Clear audit opinion

A positive written expression provided when the financial report has been prepared and presents fairly the transactions and balances for the reporting period in accordance with the requirements of the relevant legislation and Australian Accounting Standards—also referred to as an unqualified audit opinion.

Depreciation

Systematic allocation of the value of an asset over its expected useful life, recorded as an expense.

Emphasis of matter

A paragraph included in an audit opinion that refers to a matter appropriately presented or disclosed in the financial report that, in the auditor's judgement, is of such importance that it is fundamental to users' understanding of the financial report.

Equity or net assets

Residual interest in the assets of an entity after deduction of its liabilities.

Expense

The outflow of assets or the depletion of assets an entity controls during the financial year, including expenditure and the depreciation of physical assets. An expense can also be the incurrence of liabilities during the financial year, such as increases to a provision.

Financial report

A document reporting the financial outcome and position of an entity for a financial year, which contains an entity's financial statements, including a comprehensive income statement, a balance sheet, a cash flow statement, a comprehensive statement of equity and notes.

Financial sustainability

An entity's ability to manage financial resources so it can meet its current and future spending commitments, while maintaining assets in the condition required to provide services.

Financial year

A period of 12 months for which a financial report is prepared, which may be a different period to the calendar year.

Governance

The control arrangements used to govern and monitor an entity's activities to achieve its strategic and operational goals.

Internal control

A method of directing, monitoring and measuring an entity's resources and processes, in order to prevent and detect error and fraud.

Liability

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of assets from the entity.

Local Government Act 1989

An Act of the state of Victoria that establishes the:

  • purpose of local authorities
  • powers that will enable local authorities to meet the needs of their communities
  • accountable system of local government
  • reform of law relating to local government.

Management letter

A letter the auditor writes to the governing body, the audit committee and management of an entity outlining issues identified during the financial audit.

Material error or adjustment

An error that may result in the omission or misstatement of information, which could influence the economic decision of users taken on the basis of the financial statements.

Net result

The value that an entity has earned or lost over the stated period (usually a financial year), calculated by subtracting an entity's total expenses from the total revenue for that period.

Performance report

A statement detailing an entity's predetermined performance indicators and targets for the financial year, and the actual results achieved, along with explanations for any significant variances between the actual result and the target.

Revaluation

The restatement of a value of non-current assets at a particular time.

Revenue

Inflows of funds or other assets or savings in outflows of service potential, or future economic benefits in the form of increases in assets or reductions in liabilities of an entity, other than those relating to contributions by owners, that result in an increase in equity during the reporting period.

Risk

The chance of a negative or positive impact on the objectives, outputs or outcomes of an entity.

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