AUDIT ADJUSTMENT Definition

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AUDIT ADJUSTMENT is a correction of a financial information misstatement identified by the auditor, whether recorded or not.

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PREPAYMENT RISK, in the area of mortgage-backed securities, which are backed by loans on property, is the possibility that home owners will payoff their mortgages early, returning the investor's principal earlier than expected. This typically occurs during a declining inter­est rate environment, when home owners can refinance at lower rates, leaving investors vulnerable to the risk of reinvestment at lower rates.

SUBORDINATED DEBENTURE, in securities, is a debt issue whose claim on assets is subordinated to that of general creditors in the event of a liquidation, as stated in the bond indenture.

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