Exercise 5 What does an auditor do? Look at the following activities and decide which ones are normally done internally or externally.

1. spends time getting to know the business as well as the environment and the industry in which it operates; 2. analyses the internal business and financial systems used to make and record transactions; 3. gathers evidence on the financial control systems and the figures in the financial statements; 4. gives advice on the business methods and transactions of the company; 5. examines financial statements to determine whether they conform to generally accepted accounting principles; 6. prepares the financial statements in accordance with the generally accepted accounting principles of the country where the enterprise operates; 7. examines the management report and determines whether it conforms to the financial statements; 8. guarantees the correctness of the figures presented; 9. provides consulting services; 10. presents a written report to the management of the company, describing whether the accounting records, financial statements and management reports conform to legal requirements; 11. maintains confidentiality and independence.

 

Exercise 6 a) Read the conversation between a partner in an audit firm and the Chief Financial Officer of a French company.

Claude: Hi Janet. Great, you got my message. Thanks for getting back to me so quickly.

J: You’re welcome. How can I help?

C: Well, it’s about your preliminary report. There are a couple of things I think we need to discuss.

J: Yeah, sure. No problem. I have it in front of me.

C: The first point is on page eleven, third paragraph. What do you mean, exactly?

J: OK. Let’s have a look. Capitalization of costs in your factories. We think that these costs should be expenses in the P&L.

C: But … no, sorry. I’m afraid I disagree. They were necessary for the upgrade of our plant. Surely you agree that we have to keep up with the competition?

J: Yes, of course. But lots of the items we tested are clearly normal repair and maintenance expenses. You can’t really justify including such costs under machine upgrades.

C: I see it differently. Our machines have been developed to produce a wider variety of products, to improve the running efficiency of the equipment, to keep us in business. This was a sizeable investment on our part. The figure we’re talking about shows the commitment we’ve made to the future. I mean, we’re going to be getting benefits from these upgrades for years. Our balance sheet should show this.

J: I’m sorry. These figures are too material for us to ignore.

C: Companies do this all the time and, I might add, their auditors accept it. I suggest you consider this again. I’m sure you’ll find it’s reasonable when you think about how important these investments were to this company.

J: All right. We’ll look at these costs again. Let’s move on the next point.

 

b) Decide if the statements which follow are true or false.

1. Janet wants to talk to Claude about a report. 2. Janet thinks that capitalization of costs should be expenses in the P&L. 3. Claude agrees with Janet on this point. 4. Claude thinks capitalization of costs should be classed under machine upgrades. 5. Claude’s reasoning is that the upgrades are really investments in the future. 6. Janet agrees to reconsider her opinion.

 

Exercise 7 a) Read and translate the text.

 

THE FUTURE OF ACCOUNTING

The traditional view of accountants as merely ‘ bean counters’ is slowly becoming a thing of the past. For centuries, accountants have been employed to report on the numbers. They have sat there in their little corner, surrounded by stacks of paper and computer printouts, and have told us whether or not we have made a profit. But more and more, accountants are finding that management doesn’t need them to report on the numbers. With today’s technology, management already has access to software programs which do this work for them.

So what will the future accountant do? According to Mr Hamilton-Smythe, the Managing Director of KHZ Enterprises, the large international manufacturing company, accountants will be employed ‘to help companies change the numbers. Their expertise and knowledge of the business will be called upon to prepare strategies. They will become consultants and advisers. And their skills will need to change accordingly. They will be involved in international meetings, in giving presentations, running international teams, writing reports, and making decisions.’

This is going to require a significant change in the general public’s opinion of accountants, who in turn will need to develop skills not traditionally associated with the job. The image of the guy in the corner with the stacks of paper will change to one of a high flyer, someone who is critical to the success of the organization.

bean counter – бухгалтер, рахівник

b) Answer the following questions.

1. What do you think the future of accounting looks like?

2. What skills will you need to be successful in the profession?

3. How will you prepare yourself for the future?

 

Exercise 8 Single out the main points of the text ‘The future of accounting’. Use the following opening phrases:

The title of the text is...

The text deals with the issue of...

It is clear from the text that...

One of the main points to be singled out is...

It further says that...