B. Dialogue auditing in russia

Englishman: In most industrialized countries audit is a statutory requirement applying to limited companies. Are there any similar regulations in force in Russia?

Russian: The transition to a market economy has led to the establishment of new market mechanisms and creation of new institutions. Under the legislation in force, joint ventures are required to submit their annual financial statements, audited by an auditing organization, to the local financial authority.

En.: As far as I know, you didn't use to have auditing firms in the past. Are there any auditors now?

R.: Yes, there are. This profession is developing very fast. There are hundreds of auditing firms in every big city now.

En.: In the UK the auditor is responsible for ensuring that the accounts show a "true and fair" view of the business's financial position and performance. What is auditing in your country?

R.: As elsewhere, auditing in our country is a process in which an independent accountant examines a firm's records, analyses financial statements and offers an opinion on their accuracy and reliability. If the auditor doesn't find faults he confirms the Balance Sheet and the Profit and Loss Account.

En.: I see, we have much in common here. Our auditors, as a rule, are chartered public accountants, too. Besides, our auditors are very active in consultancy.

R.: Due to the specific business environment, auditors in our country render a very wide range of consultancy services.

En.: I suppose they help their clients to prepare tax returns and give advice on the maintenance of accounting and organization of internal control.

R.: Not only. Our auditors also give advice on how to set up businesses, how to improve an enterprise management, explain to their clients rules for performing foreign trade transactions and foreign currency operations.

En.: It is widely believed in the UK that if auditors are to play their proper part in the national economic development, they must be independent of pressures not simply from clients but also, as far as practicable, from government or state agencies.

R.: The majority of our auditors fully share this point of view. Besides, we believe that an independent, effective and efficient profession requires a strong institutional infrastructure. Audit chambers have been set up throughout our country.

En.: It's nice to hear it. Besides, the strength and prestige of a professional body depends on the professional competence. Who is entitled to carry out statutory audits of accounting documents in Russia?

R.: Only auditors having a license. We know that the professional qualifications for auditors in the UK are very high. What are they?

En.: Well, our standards in this field are really very high. Every chartered accountant undergoes several years of intensive professional training culminating in examinations of a very high standard. Even then, further experience and study are required to obtain a practising certificate.

R.: What subjects do the examinations cover?

En.: A very wide range, I must say. They include auditing, analysis and critical assessment of annual accounts, general accounting, consolidated accounts, cost and management accounting, internal audit, legal and professional standards relating to the statutory auditing, company law, the law on insolvency, tax law, civil and commercial law, employment law, basic principles of financial management, etc.

R.: It's not surprising that your accountants and auditors are respected the world over.

В. statutory requirement установленное законом требование

in force действующий

"true and fair" view of the business's financial position точное отражение финансового положения компании

to find faults находить недочеты

profit and loss account счет прибылей и убытков

chartered public accountant дипломированный частнопрактикующий бухгалтер

consultancy n предоставление консультационных услуг

to render a wide range of services предоставлять широкий перечень услуг

tax return налоговая декларация

maintenance of accounting ведение системы бухгалтерского учета

enterprise management управление предприятием

foreign trade transaction внешнеторговая сделка

foreign currency operation операция с иностранной валютой

institutional infrastructure институциональная инфраструктура

audit chamber аудиторская палата

professional competence профессиональная компетентность

to be entitled иметь право

statutory audit аудит, предписанный законом

professional qualifications профессиональные квалификационные требования

practising certificate свидетельство, дающее право заниматься аудиторской деятельностью

consolidated accounts сводная отчетность

cost and management accounting производственный и управленческий учет

insolvency n неплатежеспособность

civil and commercial law гражданское и коммерческое право

employment law закон о занятости

Words you may need:

Swedish National Audit Office Государственная ревизионная служба Швеции

foster v поощрять, благоприятствовать

cash flow поток наличных средств

public administration управление на государственном и местном уровнях

appropriation n ассигнование

fee-financed на хозрасчете

INTOSAI Международная организация высших контрольных органов

EUROSAI Европейская организация высших контрольных органов

Words you may need:

voucher n оправдательный денежный документ

authorization of accounts for payment разрешение на осуществление платежей со счетов

handling of cash использование наличности

cash balance остаток кассовой наличности

cashier's book журнал кассовых операций

bank statement выписка из счета

receipt n квитанция

to obtain evidence получить доказательство

disbursements n pl выплаты

cash book кассовая книга, журнал кассовых операций

cast v подсчитывать, исчислять, подводить итоги

posting v проводка

ledger n бухгалтерская книга, бухгалтерский регистр

expenses incurred понесенные расходы

detect v обнаруживать

rectify v исправлять

Creditors' Ledger книга кредиторов

test-check v проверять с помощью тестов

audit statement аудиторский отчет

Sales Ledger книга учета продаж

Day Book книга операций рабочего дня

defalcation n присвоение чужих денег

fraud n мошенничество, обман

Words you may need:

misuse n злоупотребление

universally accepted общепринятый

habitually adv обычно

divert v отвлекать, отводить

lucrative adj прибыльный, выгодный, доходный

personal gain личная выгода

Accounts Chamber Счетная палата

designated purposes указанные (запланированные) цели

consent n согласие

violation n нарушение

embezzlement n растрата

court ruling постановление суда

sue v искать в суде, преследовать в судебном порядке

misappropriation n незаконное присвоение, растрата

remit v переводить (средства)

recipient n получатель

fast-yielding deals сделки, быстро приносящие прибыль

valuables n ценности

bar v запрещать

Words you may need:

disclosure n отражение (информации в финансовой отчетности)

fraud n обман, мошенничество

the importance of internal auditing.

a) Audit is an examination of the records and reports of an enterprise by accounting specialists other than those responsible for their preparation. Public auditing by independent accountants has acquired professional status and become increasingly common with the rise of large business units and the separation of ownership from control. The public accountant performs tests to determine whether the management's statements were prepared in accordance with acceptable accounting principles and fairly present the firm's financial position and operating results. Such independent evaluations of management reports are of interest to actual and prospective shareholders, bankers, suppliers, lessors, and government agencies. Generally speaking, auditing has two functions: to reveal undesirable practices and, as far as possible, to prevent their recurring in the future. A relatively new type of auditing is internal auditing. It is designed to evaluate the effectiveness of a business's accounting system. Perhaps the most familiar type of auditing is the administrative audit, or pre-audit, in which individual vouchers, invoices or other documents are investigated for accuracy and proper authorization before they are paid or entered in the books.

In English-speaking countries, public auditors are usually certified, and high standards of professional qualification are encouraged.

Most countries have specific agencies or departments charged with the auditing of their public accounts.

Taxpayers in all countries are interested in the sound management of the collected revenue, they also want to know whether or not the executive branch of government is complying with the law, especially in the area of public finance.

Government auditors are working for sound, economical and efficient financial management, addressing the key problems in the field of public sector auditing, like strengthening the institutions that oversee financial management, changes in the scope and methodology of government auditing, ability to conduct performance audits in public enterprises, strengthening internal auditing in spending units, ex-post external audits of government activities, budget efficiency problems, performance of expenditure programmes.

The advantages accruing from an audit are obvious, taking into account the complexity of present-day commerce and business.

Independent Auditor's Report Dear Sirs, We have audited the accompanying general purpose financial statements of Cobb County, Georgia, and the combining, individual fund and account group financial statements of Cobb County, Georgia as of and for the year ended September 30, ... These financial statements are the responsibility of Cobb County, Georgia's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 general purpose financial statements referred to above present fairly, in all material respects, the financial position of Cobb County, Georgia at September 30.....and the results of its operations and the cash flows of its proprietary fund types for the year then ended, in conformity with generally accepted accounting principles. Also, in our opinion, the combining, individual fund and account group financial statements referred to above present fairly, in all material respects, the financial position of each of the individual funds and account groups of Cobb County, Georgia, at September 30, ..., and the results of operations of such funds and the cash flows of individual proprietary funds for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole and on the combining, individual fund and account group financial statements. The accompanying financial information is presented for purposes of additional analysis and is not a required part of the financial statements of Cobb County, Georgia. The information has been subjected to the auditing procedures applied in the audit of the general purpose, combining, individual fund and account group financial statements and, in our opinion is fairly stated in all material respects in relation to the financial statements of each of the respective individual funds and account groups, taken as a whole. Atlanta, Georgia, January 12,...

Foreigner. As far as I know, when you started your economic reforms some people believed that under market conditions the controlling function of the state would be losing its importance. Has this idea proved to be true?

Russian: It's clear now that the idea was erroneous. Results of audits and inspections reveal lots of breaches of the tax law, misuses of public money, misappropriations and numerous cases of budget funds squandering.

F.: How can you account for so numerous financial infringements in Russia now?

R.: The situation we are having now is a consequence of a weak legal base, shortcomings in running the country's finances, absence of a legal base for an active financial control.

F.: What infringements are most frequent?

R.: Well, first of all, I would single out diverting of money away from the stated purposes into lucrative deals for personal gain. I mean funds allocated as returnable resources and budget resources allocated as the state support for different branches of economy. Then I would mention transfer of state funds to commercial units, embezzlements, defalcations, and misappropriation of funds.

F.: We have heard about scandals in your country when managers illegally placed so-called "free money" in commercial banks and used the profit made to satisfy their own needs, like buying cars and real estate, going abroad on holiday and so on.

R.: That's true. In some cases, managers underreport their taxable profit, do not disclose income in accounting documents, start business operations without licenses, avoid paying excise duties, etc. There is no legally established responsibility for the misuse of budget funds, which causes irresponsibility, wastefulness, and criminal actions on the part of senior officials and managers. Do you have similar problems?

F.: Well, yes, we have, but on a smaller scale. There is an efficient system of government auditing in our country. We examine accounting and performance of all government agencies and public corporations. What are the functions of government auditing in Russia?

R.: Generally, we focus on compliance of government agencies, juridical persons with financial legislation of the Russian Federation, we audit execution of the federal budget and extra-budget funds, control money circulation, use of credit resources, external and internal state debt, state reserves, safe keeping and use of state property. We are also responsible for many other things.

F.: What measures do you take when you detect financial misdeeds? Do you hand your reports to investigating authorities?

R.: Yes, we do. Investigating authorities institute proceedings on the basis of our reports. We must work to improve the system of financial control in Russia because it does not fully meet the present-day requirements.

F.: You mean the vigorous emergence of the private sector?

R.: Yes, the development of market relations and public and private finances.

Words you may need:

squandering n проматывание (средств)

infringement n нарушение (законов)

wastefulness n расточительность

investigating authorities следственные органы

to institute proceedings начинать судебное разбирательство

Continuing Professional Education

The Audit Registration Committees of the Institutes of Chartered Accountants in Britain are extremely interested in and concerned about continuing professional education (CPE). CPE is essential for all principals and employees who deal with audit work. Indeed, it is more than essential, it is compulsory. It is there to ensure that firms maintain their competence to do audit work and maintain the high professional standards expected of firms of chartered accountants.

Principals and employees must keep up-to-date with changes in company law, accounting and auditing standards, etc.

The amount of CPE is not expressed as an absolute total, but a target of 150 points. One point is given for each "unstructured" hour of CPE (e.g. reading) and three points for each "structured" hour (e.g. course attendance). Of the target of 150 at least 60 points should be structured activities. For auditors, half those amounts (i.e. 75 points of total and 30 points of structured education) should be audit-related. Thirty structured CPE points is, for example, 10 hours of course attendance.

The current system of CPE has been in place since 1991. There are no exemptions due to the age of the practitioner or the volume of audit work undertaken.

The ARCs accept that in any particular year the targets may not be met. It is important that auditing firms should take a conscientious approach to CPE. However, the ARCs are becoming increasingly concerned about firms who have done little, if any, CPE.

In the Committees' view, there is a wealth of CPE available. Courses are run by the institutes, district societies and commercial training organizations. There should be no excuse for not doing CPE. Firms should be aware that ARCs will take a firm line with firms who do inadequate CPE.

Ex. 18. a) Read through the text for general information.

b) Reread the text more carefully and pick out information about the JMU.

The EU 8th Company Law Directive set out the requirements for each member state to have a common minimum regulatory system for auditors of limited companies. The United Kingdom enacted this through the Companies Act 1989 and added a requirement for monitoring. Since 1 October 1991, a firm must be a Registered Auditor to conduct company audit work.

In 1990 the Department of Trade and Industry granted the status of Recognized Supervisory Body to ICAEW, ICAS and ICAI, thus allowing these institutes to register and regulate Registered Auditors.

Specifically, this work is done by Audit Registration Committees which register auditors and then organise monitoring.

Monitoring is conducted on behalf of the Institutes by the Joint Monitoring Unit, which was set up in 1987 to monitor the compliance of firms authorized to conduct investment business and whose role was extended in 1991 to include monitoring the work of Registered Auditors.

The monitoring activities of the JMU involve:

• issuing and reviewing firms' Annual Returns,

• conducting visits to firms,

• reporting the results of visits to the ARCs.

Activities of the JMU aim to assess whether or not the firm has complied with Audit Regulations and Standards. The JMU seeks to assist firms by making practical suggestions for improvements of their audit performance.

Words you may need:

ICAEW – Institute of Chartered Accountants of England and Wales Институт дипломированных бухгалтеров Англии и Уэльса

ICAS – Institute of Chartered Accountants of Scotland Институт дипломированных бухгалтеров Шотландии

ICAI – Institute of Chartered Accountants of Ireland Институт дипломированных бухгалтеров Ирландии