Open the brackets putting the verbs in the correct form:

At the end of the month or more frequently all journal entries (to post) into the book of accounts (to know) as a general ledger (to consist) of separate pages for each account. The page for each account (to show) its debits and its credits, so that the balance of each account (can) (to determine). As each jour­nal entry (to record) on the (to plan) side of its account, a mark (to place) in the post column of the journal in order (to show) that it already (to record) in the ledger. The date (to use) in the ledger (to be) the date on which the entry first (to record) in the journal. The post column in the account (to use) (to show) which page this entry (to post) to in the ledger.

In addition to the general ledger, a subsidiary (дополнительный) ledger (to use) in order (to provide) information in greater detail about the accounts in the general ledger. For example, the subsidiary ledger (may) (to keep) for the amount of money (to owe) to the company by all its customers, for the wages (to pay) to each employee, for each building or machine (to own) by the company and for amounts (to owe) to each of the company's creditors.

 

3. Using texts 1 and 2 answer the questions:

1) What is the difference between a journal and a ledger?

2) What types of journals and ledgers are used in bookkeeping?

3) What are the main steps in the process of recording information about transactions?

 

4. Prepare for a short talk:

1. The main tasks of bookkeeping.

2. Imagine you are a bookkeeper. What do you think of this profession? Is it dangerous?

3. Could you say that the profit of a firm depends on the bookkeeper’s work?

 

 

Unit 21

 

to examine перевіряти, проводити ревізію

accounting records документи обліку

to offer an opinion зробити висновок

account audit аудит рахунків

indepth audit report детальний аудиторський звіт

audit procedures методика проведення ревізії

substantive test незалежна перевірка

test in totals перевірка підсумкових чисел

audit risk риск неякісного контролю

detection risk риск (не) виявлення

to qualify the opinion дати аудиторський висновок з застереженнями (оговорка)

 

Read sentences only with new lexis and translate them.

1. Auditing is a process in which an independent accountant-auditor examines a firm's accounting records and financial statements and offers an opinion on their accuracy and reliability.

2. The auditor should focus on any misstatement whether it is intentional or unintentional.

3. Special bodies of users, such as supervisory boards, employee representatives, government agencies may sometimes need an indepth audit report.

4. The auditor normally starts with a study of the business environment the audited company is working in and performs a preliminary analytical review.

5. It should be stressed that auditors do not monitor, they offer an opinion, and the audit process and audit procedures are complicated and manifold.

6. Defining the audit strategy the auditor has to decide whether to rely on internal controls or to resort to substantive testing applying analytical review procedures, such as tests in totals, comparison with budgets or even statistical analysis of figures.

 

Put the missing letters.

To q…lify the op.n.on, a..dit r..sk, s..bst..nt..ve test, test in t..t..ls, unq..l..f..d risk, ind..p.. a..dit r..port, ac…nt a..dit, to o…er an op..n…n.

Read the text.

AUDITING

PERFORMING AN AUDIT

Auditing is a process in which an independent accountant-auditor examines a firm's accounting records and financial statements and offers an opinion on their accuracy and reliability.

There are different types of audits, for example, financial statements audits, income tax audits, "value for money" audits, environmental audits, administrative audits, financial management audits, etc.

The accountancy profession has built up¹ a significant amount of expertise in performing financial statements audits.

Accounts audits were established as an instrument to protect third parties, the users of accounts, since the auditor's opinion helps establish credibility of financial statements.

Special bodies of users, such as supervisory boards², employee representatives, government agencies may sometimes need an indepth audit report, which is usually confidential.

It should be stressed that auditors do not monitor, they offer an opinion, and the audit process³ and audit procedures are complicated and manifold⁴. The auditor's opinion is gradually being built up from a mass of detailed work to the final judgement through the planning and testing stages. The auditor normally starts with a study of the business environment the audited company⁵ is working in and performs a preliminary analytical review.

Then he should direct his attention to the financial statements. Interestingly enough, however, the auditor's attention is not directed towards the financial statements' elements as such, but towards the correctness of various assumptions made by the management for their preparation. For instance, the auditor needs to know if figures are complete and accurate and reflect what they should reflect, if income and expenses are recorded in the proper periods and if the legal position is reflected adequately.

The auditor should focus on any misstatement⁶ whether it is intentional or unintentional.⁷ The management is responsible for the reliability of financial information. If the management is not prepared to take the responsibility it may be hard to complete the audit. In such situations the auditor should seek his own evidence by means of independent audit procedures.

Although the financial statements are the ultimate objectives of an audit, normally such audits cannot be completed without a proper study and evaluation of the accounting system and assessment of the internal accounting controls.

Defining the audit strategy the auditor has to decide whether to rely on internal controls or to resort to substantive testing applying analytical review procedures, such as tests in totals, comparison with budgets or even statistical analysis of figures.

In the planning stage as well as during the performance of audit procedures and, finally, in forming conclusions, "materiality" and "audit risk" are critical⁸ elements in the auditor's judgement. "Materiality"⁹ refers to the magnitude¹⁰ or nature of a misstatement (including an omission) of financial information.

"Audit risk" (including three different components - inherent risk, control risk, detection risk) is the risk that an auditor may give an inappropriate opinion on financial information that is materially misstated.

The natural finalization of the audit process is the auditor's report, reflecting the auditor's opinion on the financial statements. Unfortunately, audits do not always end up in an approval of the financial statements.

Any deviation from the unqualified opinion should be explained in the auditor's report, including the uncertainty or the disagreement that caused the auditor to qualify his opinion¹¹.

In order to protect the public interests and the profession's integrity¹² an individual must be sufficiently educated and adequately trained before being certified¹³ to act as an auditor.

Below you will find a sample of an auditor's opinion:

To the Shareholders of... Ltd.:

We have audited the accompanying¹⁴ balance sheet of... Ltd. as of 31 December... and the related statement of income¹⁵ for the year then ended.

Our audit was conducted¹⁶ in accordance with generally accepted auditing standards¹⁷ and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances to establish whether the balance sheet and related statement complied with Ukrainian regulations¹⁸ and were in agreement¹⁹ with the underlying²⁰ accounting records.

In our opinion, the balance sheet and related statement of income of... Ltd. referred to above have been prepared in compliance²¹ with the relevant Ukrainian regulations and are in agreement with the underlying accounting records.

Odessa, 24 March...

Words you need:

build up¹ накопичувати

supervisory board² спостережлива рада

audit process³ процес проведення аудиторської перевірки

manifold⁴ багатосторонній

audited company⁵ компанія, яку перевіряють

should focus on any misstatement⁶ необхідно звертати увагу на будь-які перекручування не дивлячись на те

whether it is intentional or unintentional⁷ чи є воно навмисним чи ні

critical⁸ який є вирішальним

materiality⁹ істотність

magnitude¹⁰ розмір

that caused the auditor to qualify his opinion¹¹ які змусили аудитора внести застереження в свій висновок

integrity¹² професійна чесність

certify¹³ видавати посвідчення

accompanying¹⁴ який прикладається

the related statement of income¹⁵ відповідний звіт про прибутки та збитки

to conduct¹⁶an audit проводити аудиторську перевірку

generally accepted auditing standards¹⁷ загальноприйняті стандарти аудиту

to comply with regulations¹⁸ відповідати правилам

in agreement¹⁹ with у відповідності з

underlying²⁰ який лежить у основі

in compliance²¹ with у відповідності з

Exercises

Answer the questions.

1. What is auditing?

2. What audits are practiced nowadays?

3. What does the auditor's opinion help establish?

4. How is an audit planned?

5. What do auditors normally start with?

6. What do auditors direct their attention to when they analyse financial statements?

7. What responsibilities do managers (directors) undertake with regard to the audit?

8. What are the responsibilities of auditors?

9. Dо auditors study and evaluate the accounting system and the internal accounting control during the audit? Do they rely on internal controls?

10 What are the most critical elements in the auditor's judgement?

11. Do all audits end up in the approval of the financial statements?
Why do auditors sometimes disclaim or qualify their opinions?

12. Who has the right to act as an auditor?

13. What audit was conducted by the auditors whose opinion is stated in the sample?

What were the auditors responsible for?

14. What opinion was expressed?

 

2. Find in the text English equivalents for the following Ukrainian phrases:

Перевіряти облікову документацію; давати висновок у відношенні точності та вірогідності фінансового звіту; аудит фінансової звітності; ревізія вірності начислення прибуткового податку; аудит оптимального використання грошових засобів; аудит заходів з охорони навколишнього середовища; ревізія правильності дій правління; перевірка ефективності фінансової діяльності правління; облікові працівники накопичили значний досвід у..; аудит рахунків є інструментом захисту інтересів користувачів фінансової звітності; висновок аудитора робить фінансову звітність надійною; спостережним радам та відомствам інколи потрібні глибокі аудиторські звіти, які є, як правило, конфіденційними; аудитори не контролюють, вони дають висновок у відношенні точності та вірогідності фінансового звіту; ділове середовище, у якому працює компанія, яку перевіряють; аудитори звертають свою увагу на правильність припущень правління; навмисне або ненавмисне перекручування даних; брати на себе відповідальність за; процедура проведення аудиторської перевірки; оцінка системи внутрішнього контролю; удаватися до незалежних перевірок; аналіз фінансово-господарської діяльності.

 

3. Think of the nouns that are most often used with the following verbs:

To complete, to perform, to misstate, to omit, to approve, to audit, to conduct, to examine, to prepare, to carry out, to obtain.

 

4. Think of the verbs that are most often used with:

Opinion, audit, auditor’s report, internal controls, substantive testing, payments, evidence.

5. Match the verbs from (a) with the nouns from (b) below:

a)To share b) certificate

To take assumption

To seek responsibility

To submit faults

To give services

To make advice

To obtain point of view

To find financial statements

To submit evidence