Auditors and their reports

Auditors are usually independent certified accountants who review the financial records of a company. These reviews are called audits. They are usually performed at fixed intervals - quarterly, semiannually or annually. Auditors are employed either regularly or on a part-time basis. Some large companies maintain a continuous internal audit by their own accounting departments. These auditors are called internal auditors.

Not so many years ago the presence of an auditor suggested that a company was having finacial difficulties or that irregularities had been discovered in the records.

Currently, however, outside audits are a normal and regular part of business practice. Auditor's see that current transactions are recordered promptly and completely. Their duty is to reduce the possibility of misappropriation, to identify mistakes or detect fraudulent transactions. Then they are usually requested to propose solutions for these problems.

Thus auditors review financial records and report to the management on the current state of the company's fiscal affairs in the form of Auditor's Report or Auditor's Opinion.

Words and expressions

auditors accountant quarterly semiannually internal auditor irregularity current transaction misappropriation fraudulent

аудитор бухгалтер по квартально раз в полгода внутренний аудитор нарушение текущие операции незаконное присвоение, растрата обманный, мошеннический

Exercise 10. Answer the following questions

1. What do auditors do?

2. Audits are planned actions, aren’t they?

3. What did the presence of an auditor in a company suggest in the past?

4. What is auditors’ duty?

5. In what form do the auditors make their report?

6. What is the difference between internal and independent auditors?

Exercise 11. Say if the statement are true or false

1. Auditors are usually chiefs of accounting departments.

2. It is quite usual when an auditor comes to a company anytime he/she likes.

3. Internal auditors are employees of the same company where they make audit.

4. If auditors review the financial records of a company, it doesn’t mean that this company has some problems.

5. Auditors are supposed to know how to solve financial problems.

Exercise 12. Read the text and find information on:

1. The names of the auditing and audited companies;

2. The reason of Transneft’s changing its auditor;

3. The names of the documents to be complied with while conducting audit;

4. Characteristics of an emerging market.

Independent Auditor’s Report

We have audited the accompanying consolidated balance sheet of ОАО АК Transneft and its subsidiaries (the "Group") as of 31 December 2003, and the related consolidated statements of income, cash flows and changes in shareholders’ equity for the year then ended. These consolidated financial statements, as set out on the pages 6 to 25 are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

The consolidated financial statements of the Group for the year ended 31 December 2002 were audited by another auditor, whose report dated 26 May 2003 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with International Standards on Auditing as issued by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group of 31 December 2003 and the results of its operations, cash flows and changes in equity for the year then ended in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board.

Without qualifying our opinion, we draw your attention to the fact that, whilst there have been improvements in the economic situation in the Russian Federation in recent years, the country continues to display some of the characteristics of an emerging market. These characteristics include, but are not limited to, the existence of a currency that is not freely convertible in most countries outside of the Russian Federation, restrictive currency controls, and relatively high inflation. The prospects for future economic stability in the Russian federation are largely dependent upon the effectiveness of economic measures undertaken by the government, together with legal, regulatory, and political developments.

KPMG Limited

Moscow, Russian Federation

28 June 2004

Words and expressions

consolidated balance sheet cash flow to conduct in accordance with assurance to promulgate to draw your attention to convertible

консолидированный баланс движение денежной наличности проводить в соответствии с гарантия, заверение пропагандировать, распространять привлекать внимание конвертируемый

Exercise 13. Look through the table which represents “Consolidated Balance Sheet” of Transneft Company.

1. Translate the terms into Russian.

2. Discuss the numbers in the table, compare and comment on them.