Методическое пособие по профессиональному английскому языку для студентов специальности «Финансы»

Professional English.

Student’s book

Р/сан № п/п	Тару мен тақырып атаулары Наименование разделов и тем	Страница
1	Grammar review: Present tenses	2
2	Grammar review: Past and Future tenses	3
3	An accounting system	4
4	Accountancy in a free market economy	4
5	Public and private accountants	5
6	Financial statements and their elements	6
7	Income statement	6
8	Green accounting	7
9	Auditing	8
10	Auditor’s report	11
11	Reading: Adam Smith	12
12	Microeconomics and macroeconomics	12
13	Profits	13
14	Banking terms	14
15	Bank services	15
16	Tax types	16
17	Reading: English Banks	17
18	Directors and managers	18
19	Inflation and deflation	19
20	Making Inquiries	19
21	Business Offers	20
22	Prices and terms of delivery	21
23	Reading: Would you like to start business	22
24	Business partnership	23
25	Success in business	24
26	Savings and Loan Associations	25
27	Reading: Inflation	25
28	Money and banking	26
29	Reading: Banks as financial intermediaries	27
30	Reading: Bank of England	28
31	Reading: Payment system	29
32	Revision

Упр. 1 , Раскройте скобки, употребляя гла­голы в Present Simple.

(USUALLY) 1. My sister (to get) up at eight o'clock. 2. She (to be) a school-girl. She (to go) to school in the afternoon. 3. Jane (to be) fond of sports. She (to do) her morning exercises every day. 4. For breakfast she (to have) two eggs, a sandwich and a cup of tea. 5. After breakfast she (to go) to school. 6. It (to take) him two hours to do his homework. 7. She (to speak) French well. 8, My working day (to begin) at seven o'clock. I (to get) up, (to switch) on the radio and (to do) my morning exercises. It (to take) me fifteen minutes, At half past seven we (to have) breakfast. My fa­ther and I (to leave) home at eight o'clock. He (to take) a bus to his factory. My mother (to be) a doctor, she (to leave) home at nine o'clock. In the evening we (to gather) in the living-room. We (to watch) TV and (to talk).

Упр. 2 Переведите на английский язык, употребляя глаголы в Present Simple.

1. Когда вы встаете? - - Я встаю без четверти семь. 2. Когда встает твой брат? - - Он встает без двадцати восемь. — А твоя сестра тоже встает без двадцати восемь? - - Нет. Мой брат ходит в шко­лу, а моя сестра не ходит в школу. Она еще не ученица. Она встает в девять часов. 3. Мой брат работает в больнице. Он врач. Он встает двадцать минут восьмого. Он работает утром и днем. Вече­ром он не работает. Вечером он отдыхает. 4. Твоя сестра говорит по-французски? - - Нет. Она гово­рит по-немецки, а ее муж говорит по-английски.

Упр3. Переведите на английский язык,! употребляя глаголы в Present Simple.

Мой дядя инженер. Он очень занят. Его рабочий день начинается рано утром. Он встает в семь часов. Он умывается, одевается и завтракает. После завтрака он идет на работу. Он работает в институте. Он любит свою работу. Он женат. Его жена врач. Она работает в больнице. Вечером она изучает французский язык. Она посещает курсы французского языка. Мой дядя не говорит по-французски. Он говорит по-русски и по-немец­ки. Он изучает английский язык. Вечером он по­сещает курсы английского языка. Сын моего I дяди ученик. Он ходит в школу. В школе он изучает английский язык.

Сравните употребление Present Continuous и Present Simple.

Упр.4. Раскройте скобки, употребляя гла­голы в Present Continuous или в Present Simple.

I (to read) now. He (to sleep) now. We (to drink) tea now. They (to go) to school now. I (not to sleep) now. She (not to drink) coffee now. I (to read) every day. He (to sleep) every night. We (to drink) tea every morning. They (to go) to school eve­ry morning. I (not to sleep) in the day­time. She (not to drink) cof­fee after lunch. We (not to watch) TV now. They (not to eat) now. My mother (not to work) now. You (to work ) now? He (to play) now? They (to eat) now? Your sister (to rest) now? What you (to do) now? What you (to read) now? What they (to eat) now? What your brother (to drink) now? We (not to watch) TV in the morning. They (not to eat) at the lesson. My mother (not to work) at an office. You (to work) every day? He (to play) in the after­noon? They (to eat) at school? Your sister (to rest) af­ter school? What you (to do) every morning? What you (to read) after dinner? What they (to eat) at breakfast? What your brother (to drink) in the evening?

Упр. 5. Раскройте скобки, употребляя глаголы в Present Continuous или в Present Simple.

1. I (not to drink) coffee now. I (to write) an English exercise. 2. I (not to drink) coffee in the evening. I (to drink) coffee in the morning. 3. Your friend (to do) his homework now? 4. Your friend (to go) to school in the morning? 5. Look! The baby (to sleep). 6. The baby always (to sleep) after dinner. 7. My grandmother (not to work). She is on pension. 8. My father (not to sleep) now. He (to work) in the garden. 9. I usually (to get) up at seven o'clock in the morning. 10. What your sis­ter (to do) now? - - She (to wash) her face and hands. 11. When you usually (to come) home from school? — I (to come) at three o'clock. 12. Where your cousin (to work)? -- He (to work) at a hospi-taJ. 13. Your sister (to study) at an institute? -No, she (to study) at school. 14. My cousin (to go) to school every day. 15. My mother (not to play) the piano now. She (to play) the piano in the morning.

Упр. 6. Раскройте скобки, употребляя гла­голы в Present Continuous или в Present Simple.

1. I (to read) books in the evening. 2. I (not to read) books in the morning. 3. I (to write) an exer­cise now. 4. I (not to write) a letter now. 5. They (to play) in the yard now. 6. They (not to play) in the street now. 7. They (to play) in the room now? 8. He (to help) his mother every day. 9. He (to help) his mother every day? 10. He (not to help) his mother every day. 11. You (to go) to school on Sunday? 12. My friend (not to like) to play foot­ball. 13.1 (not to read) now. 14. He (to sleep) now? 15.We (not to go) to the country in winter. 16.My sister (to eat) sweets every day. 17. She (not to eat) sweets now. 18. They (to do) their home­work in the afternoon. 19. They (not to go) for a walk in the evening. 20. My father (not to work) on Sunday. 21. He (to work) every day.

Упр. 1 Раскройте скобки, употребляя гла­голы в Past Simple или Past Continuous.

I. He (to get) up at seven o'clock yesterday. 2. Father (to come) home at six o'clock yesterday. 3. I (to read) a book at six o'clock yesterday. 4. She (to fall) asleep at eleven o'clock yesterday. 5. Moth­er (to drink) tea at eleven o'clock yesterday. 6. Fa­ther (to watch) TV at ten o'clock yesterday. 7. I (to go) to bed at nine o'clock yesterday. 8. I (to finish) my homework at nine o'clock yesterday. 9. I (to play) the piano at five o'clock yesterday. 10. He (to begin) to do his homework at four o'clock yester­day. 11. She (to wash) the floor at four o'clock yes­terday. 12. I (to meet) Nick at three o'clock yester­day. 13. When I (to come) home, Kate (to play) the piano. 14. When I (to meet) John, he (to go) to the railway station. 15. When I (to go) to the museum, I (to see) a big crowd of people in the street. 18. They (to play) in the yard in the evening yester­day. 17. They (to play) in the yard the whole evening yesterday. 18. I (to clean) my teeth at eight o'clock in the morning yesterday. 19. We (to go) to the wood in summer. 20. When the teacher (to open) the door of the classroom, the pupils (to sit) at their desks.

Упр. 2. Раскройте скобки, употребляя гла­голы в Past Simple или Past Continuous.

1. At this time yesterday I (to sit) at the thea­tre. 2. He (to come) back to St. Petersburg on the 15th of January. 3. I (to go) to the institute when I (to see) him. 4. At this time yesterday we (to have) dinner. 5. He (to write) a letter when I (to come) in. 6. He (to make) a report when I (to leave) the meeting. 7. Yesterday he (to write) a letter to

his friend. 8. When I (to look) at them, they (to smile) at me. 9. What you (to do) at six o'clock yesterday? 10. I (to go) to bed at half past eleven. 11. Yesterday the lesson (to begin) at nine o'clock. 12. The cat (to take) a piece of fish 'and then (to run) away. 13. He (to read) a newspaper when I (to come) in. 14. Yesterday I (to get) up at seven o'clock. 15. The train (to start) at fifteen minutes to ten. 16. He (to put) on his coat and cap, (to open) the door and (to go) out.

Упр.3. Раскройте скобки, употребляя гла­голы в Past Simple или Past Continuous.

1.1 (to feed) my cat with fish yesterday. 2. What you (to do) at four o'clock yesterday? — I (to feed) my cat. 3. What your brother (to do) yesterday? -He (to play) computer games. 4. I (to begin) re­pairing my camera at six o'clock yesterday. 5. At five o'clock yesterday Helen (to cook) soup. 6. We (to play) badminton from nine till eleven yester­day. 7. Kate (not to go) for a walk yesterday. She (to write) a composition the whole day yesterday. 8. When your father (to come) home yesterday? He (to come) home at seven o'clock. 9. When my father (to come) home yesterday, my mother (to make) supper. 10. We (not to go) on a tramp last summer. 11. What you (to do) when your sister (to come) home yesterday? 12. You (to have) supper at nine o'clock yesterday? 13. He (not to go) to the shop yesterday. 14. Nick (to go) to bed at ten o'clock yesterday. 15. Rick (to sleep) at eleven o'clock yes­terday. 16. When we (to play) in the yard yester­day, it suddenly (to start) raining heavily. 17, I fto see) Mike when he (to cross) the street. 18. He (to begin) repairing his bicycle in the morning yes­terday. 19. He (to repair) his bicycle the whole dayyesterday.

Упр. 4. Раскройте скобки, употребляя гла­голы в Past Simple или Past Continuous.

I. They (to meet) at the station two hours ago, 2. Where you (to spend) last Sunday? 3. We (to be) in a hurry because only twenty minutes (to be) left before the beginning of the performance. 4. I (to play) the violin when my friend (to come) in. He (to invite) me to the theatre and I (to accept) the invitation with pleasure. 5. He (to ring) up his friend and (to ask) him about the homework, 6, When I (to come) to the theatre, my friend al­ready (to wait) for me. 7. Last Sunday we (to go) sksing in the country. There (to be) already a lot of snow in the fields and we (to enjoy) ourselves. We (to ski) for two hours and a half.

Fnp.5. Раскройте скобки, употребляя гла­голы в Past Simple или Past Continuous.

I. They (to translate) a difficult text yesterday, 2. I (to open) the window at six o'clock yesterday, 3. You (to go) to the cinema yesterday? 4. I (not to sec) Mike last week. 5, When I (to open) the door, my friends (to sit) around the table. 6. When you (tu begin) doing your homework yesterday? 7. We (tu discuss) the latest news from three till four yesterday. 8. When I (to read) the newspaper yes­terday, I (to find) an interesting article on UFOs, 9. Lena (to sweep) the floor on Sunday. 10. Lena (t sweep) the floor from eleven till twelve on Sun­day. 11. They (to go) to the wood last Sunday? 12, When they (to sail) down the river they (to sc-.-j a little island. 13. We (to work) the whole morning yesterday, 14. Mother (to cook) dinner at three o'clock yesterday. 15. She (to finish) cook-| ing at four o'clock yesterday. 16. At half past four yesterday we (to have) dinner. 17. You (to watch) I TV yesterday? - - Yes, we (to watch) TV the whole evening yesterday. 18. When you (to go) to bed yesterday? 19. 1 (to go) to bed at ten o'clock yes-I terday. 20. At half past ten yesterday I (to sleep). 21. When I (to come) home from school yesterday, r little brother (to sit) on the floor with all his toys around him. He (to play) with them. I (to tell) him to put his toys into the box as he (to make) too much noise.

An accounting system in a given country is one of the key elements of the economic system. It is determined to a significant extent by the level and direction of the economic system's development.The most important theoretical concept of the Anglo-American accounting may be summed up as follows: the subject of accounting is the calculation of the financial results of an economic entity's business activity.Accounting is used to describe the transactions entered into by all kinds of organizations.Accounting can be divided into three phases: capture, processing and communication of financial informationThe first phase, the process of capturing financial information and recording it, is called book-keeping Accounting extends far beyond the actual making of records. It includes their analysis and mterpretation it shows the relationship between the financial results and events, which have created them.Accounting can show the managers or owners of a business whether or not the business is operating at a profit, whether or not the business will be able to meet he commitments as they fall due.Accounting is based on the accounting equation which states that a firm’s assets must equal its liabilities plus its owners' equity.

Assets and liabilities, profits and losses are listed in financial statements. The two main types of financial statements are the balance sheet and the income statement (profit and loss account).

The balance sheet lists a firm's assets, liabilities and owner’s equity at a point of time.

Changes in the balance sheet are made according to he principle of double-entry book-keeping. This principle states that each transaction must be recorded on the balance sheet as two separate entries so that the totals of each side will always equal one another, and that this will always be true no matter how many transactions are entered into.

Balance sheets are diawn up periodically: monthly, quarterly, half-yearly, annually.

There is an account for every asset every liability- and capital Accounts can be prepared either on a cash or accrual basis. Each account should be shown on a separate page.

The double entry system divides each page into two halves. The left-hand side is called the debit side, while the right-hand side is called the acredit side.

The balance sheet shows a lot of useful financial information, but it does not show everything. A firm's sales, costs, and profits for a given period are shown in an income statement.

4. Нығайту:

Закрепление:

Answer the questions on the text:

1. What role does an accounting system play in an economy?

2. Into what phases is accounting broken down?

3. What is an accounting equation?

4. What is the most widely practiced principle of book-keeping?

5. What does the balance sheet list?

6. What is shown in the income statement?

accounting бухгалтерский учет to a significantextent в значительной степениphase стадия, фаза capture (зд.) получение (информации)

processing обработка (информации) communication передача (информации)

recording запись (информации) book-keeping счетоводство

record запись, записывать, отражать в отчетности ataprofit с прибылью

tomeetone'scommitments выполнятьобязательства

tofalldue наступать (об обязательствах), подлежать оплате, выполнению

accountingequation бухгалтерское равенство assets активы

liabilitiesпассивы owner’sequity собственный (акционерный) капитал компании financialstatements финансовая отчетность

balancesheet балансовый отчет, баланс incomestatement отчет о прибылях и убытках profitandlossaccount счет прибылей и убытков

double-entrybook-keeping бухгалтерский учет по методу двойной записи

entry запись, проводка account счет cashbasis метод записи доходов и издержек на счетах только при их поступлении и выплате, кассовая база

accrualbasis метод вычислений при учете доходов и издержек, запись доходов и издержек в момент завершения операции

debit дебет debitside левая сторона баланса, дебет счета

credit кредит creditside правая сторона баланса, кредит счет

A Balance-sheet The position of the enterprise is presented in the balance sheet. That statement shows resources and the claims to or interests in them and provides an indication of the financial strength of the enterprise. The balance sheet includes the following elements:

Assets Assets include property, plant and equipment, financial leases, investments in subsidiaries and other enterprises: long-term receivables; purchased goodwill, patents, trade marks and similar intangibles: marketable securities: current receivables (or trade debts): inventories: cash and bank balances: and prepaid expenses. Assets arise from past events, which may be cash or non-cash transactions. Assets may be purchased, exchanged for other assets, self-generated or received as grants or donations. An asset is recognized when it is reasonably certain that the future economic benefit embodied in it will flow to the enterprise. In a number of countries, intangible assets such concessions, patents, licenses, trade marks and similar rights and assets may be recognized in the balance sheet only if they were acquired for a valuable consideration. A number of countries allow assets to be earned on the balance sheet only if the reporting enterprise is the legal owner.

Liabilities. Liabilities include long-term loans and debentures, short-term loans, and bank overdrafts, payables, pension plans and similar financial obligations. The scope of definition of liabilities covers obligations whose financial amounts can or cannot be established precisely. It therefore covers what is usually described as provisions in some countries. Provisions are liabilities, the amount of which cannot be established precisely. or the occurrence of which is uncertain. In some countries, provisions may not be used to adjust the value of assets, hi those countries, value adjustments on debtors are referred to as write-downs, hi other countries, write-downs on debtors are commonly referred to as provisions. Provisions should be distinguished from .reserves, which are amounts set aside under equity' for future use with respect to obligations which may arise from probable or possible events.

A liability is recognized when it is reasonably certain that a future reduction in economic benefit will result from the settlement of the obligation.

Equity Paid-in capital is treated differently in many countries, in some of which all amounts paid hi by equity shareholders are classified as paid-in and are not further categorized. hi other countries, paid-in capital is divisible into two types: that relating to the par value of the shares offered for sale and that relating to share premium or additional capital. In consolidated balance sheets, the amount of equity should be given separately for the shareholders of the parent enterprise and for other shareholders.

Equity is a residual arising from the deduction of liabilities from the assets of the reporting enterprise. Equity arises from two sources: that provided by shareholders (for example, paid-in capital) and that generated by the activities of the enterprise (for example, earnings less distributions to shareholders, unrealized surpluses)

FINANCIAL STATEMENTS AND THEIR ELEMENTS

A. Balance-sheet

The position of the enterprise is presented in the balance sheet. That statement shows resources and the claims to or interests in them and provides an indication of the financial strength of the enterprise.

The balance sheet includes the following elements:

Assets

Assets include property, plant and equipment, financial leases, investments in subsidiaries and other enterprises: long-term receivables; purchased goodwill, patents, trade marks and similar intangibles: marketable securities:

current receivables (or trade debts): inventories: cash and bank balances: and prepaid expenses.

Assets arise from past events, which may be cash or non-cash transactions. Assets may be purchased, exchanged for other assets, self-generated or received as grants or donations.

.An asset is recognized when it is reasonably certain that the future economic benefit embodied in it will flow to the enterprise.

hi a number of countries, intangible assets such concessions, patents, licenses, trade marks and similar rights and assets may be recognized in the balance sheet only if they were acquired for a valuable consideration. A number of countries allow assets to be earned on the balance sheet only if the reporting enterprise is the legal owner.Liabilities

Liabilities.Liabilities include long-term loans and debentures, short-term loans, and bank overdrafts, payables, pension plans and similar financial obligations. The scope of definition of liabilities covers obligations whose financial amounts can or cannot be established precisely. It therefore covers what is usually described as provisions in some countries. Provisions are liabilities, the amount of which cannot be established precisely. or the occurrence of which is uncertain. In some countries, provisions may not be used to adjust the value of assets, hi those countries, value adjustments on debtors are referred to as write-downs, hi other countries, write-downs on debtors are commonly referred to as provisions. Provisions should be distinguished from .reserves, which are amounts set aside under equity' for future use with respect to obligations which may arise from probable or possible events.

A liability is recognized when it is reasonably certain that a future reduction in economic benefit will result from the settlement of the obligation.

Equity

Paid-in capital is treated differently in many countries, in some of which all amounts paid hi by equity shareholders are classified as paid-in and are not further categorized. hi other countries, paid-in capital is divisible into two types: that relating to the par value of the shares offered for sale and that relating to share premium or additional capital. In consolidated balance sheets, the amount of equity should be given separately for the shareholders of the parent enterprise and for other shareholders.

Equity is a residual arising from the deduction of liabilities from the assets of the reporting enterprise. Equity arises from two sources: that provided by shareholders (for example, paid-in capital) and that generated by the activities of the enterprise (for example, earnings less distributions to shareholders, unrealized surpluses).

Income statement/profit and loss statement

The income statement, or profit and loss statement measures performance of an enterprise. The bottom line of this statement is the net result of the operations of the enterprise in the reporting period. It reveals the change during the period in the equity of the enterprise resulting from its operations.

Revenues

Revenues are inflows or enhancements of assets (or reductions of liabilities) that arise in the course of the normal activities of the enterprise.

The events that result in revenues and revenues themselves are referred to by a variety of names: including sales, fees, interest, dividends, royalties and rent.

Expenses

Expenses are outflows or depletions of assets (or additions to liabilities) that arise in the course of the enterprise's normal activities.

The events from which expenses arise and expenses themselves are referred to by a variety of names, including cost of sales, wages and depreciation.

.An expense is recognized when it is realized that an expenditure does not produce future economic benefits. It is also recognized when a liability is incurred without the recognition of an asset. When it is possible to do so. expenses are recognized in the income statement on the basis of direct association between expenses incurred and theearning of specific items of income. The process is commonly referred to as matching of expenses with revenues.

Gains and losses

Gains are increases in equity that result from transactions that are incidental to the enterprise's activities and from other transactions, events or circumstances affecting the enterprise during a period, except those that result in revenues or equity contributions.

Losses are decreases in equity that result from transactions that are incidental to the enterprise's activities and from other transactions, events or circumstances affecting the enterprise dining a period, except those that result in expenses or distributions of equity'.

Gains are normally recognized when realized. Losses are normally recognized when realized or when it becomes evident that there is an impairment in the value of the assets, or an increase in the liabilities, to which the losses relate.

Green Accounting

"Green accounting" is accounting for theenvir onment. It is a major issue of public concern currently being addressed by the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting. In its fir st report, presented in March 1990. ISAR considered some preliminary research of the nature, benefits and costs of environmental disclosures together with some tentative recommendations, hi its second report, a year later. ISAR reviewed the response of governments and industries to its initiative in this area. On the basis of the results IS.AR made some recommendations concerning monitoring information disclosures and accounting practices in this area.

Six major global industries (chemicals, forestry products, metals, motors, petroleum and petrochemicals, and pharmaceuticals) have been chosen as the basis of this survey. The grounds for this selection were that such industries are particularly likely to have environmental information to report as they are industries that tend to have a significant impact on the environment because of the types of raw materials consumed. the production processes employed, or the nature of the end product.

The industries were asked to disclose information relevant to the following major areas of concern:

- policies and programmes about environment,

- major environmental improvements achieved.

- emission levels.

- impact on governmental legislation.

- legal proceedings,

- financial impacts.

The survey revealed that there is a high level of interest in environmental matters. 86 % of the surveyed enterprises provided at least some information. Besides, the level of disclosure has increased greatly in comparison with the situation a few yearsago. However, most corporations complied with only a veiy small number of the ISAR recommendations. The most common disclosures continue to be qualitative or descriptive in nature, but not quantitative. It is difficult to gain an objective view of a corporation's performance in this area.

A significant minority of corpor ations disclose information about the actual emission levels and contingent environmental liabilities. One major problem concerning environmental actions that few corporations have yet taken is the question of how to report the achieved results. For example, while the initiation of major environmental programmes. the achievement of large percentage reductions of emissions and the making of large financial expenditures trray indicate that a corporation is improving its performance. it may also indicate that the corporation has major environmental problems.

In contrast, the existence of no new programmes, stable emission levels and little financial expenditures may indicate that a corporation is either ignoring the problem or that the corporation has done extremely well in the past and that there is little room for further improvements. There is an encouraging sign, however, that a small number of corporations started to provide fairly detailed and objective information on the extent to which they are meeting the industry norms and governmental requirements.

Vocabulary list

Auditing аудит

Auditor аудитор

Examine проверять, проводить ревизию

Accounting rec ords документы учета

financial sta tements финансовая отчетность

to offer an opinion сделать заключение (по результатам аудиторской проверки)

audit аудит, аудиторская проверка, ревизия, проводить аудиторскую проверку

build up наращивать, накапливать

account(s) au dit аудит счетов, ревизия счетов

auditor's op inion аудиторское заключение

supervisory bo ard наблюдательный совет

government ag ency ведомство, правительственная организация

in-depth audit report детальный аудиторский отчет

audit pr ocess процесс проведения аудиторской проверки

audit pr ocedures методика проведения ревизии / аудиторской проверки

judgement суждение, оценка

audited co mpany проверяемая компания

preliminary analytical review предварительный анализ финансово-хозяйственной деятельности

assumption допущение, предпосылка, предположение

figures данные

legal po sition юридическое положение, юридический статус

misstatement сообщение неверных (неправильных) сведений, искажение сведений

to complete test audit завершить аудиторскую проверку

evaluation оценка

substantive tes t(ing) независимая проверка

testsin tot als проверка итоговых чисел

materiality «существенность» (искажения)

audit ris k риск некачественного контроля

inherent ris k присущий (виду деятельности) риск

controlris k риск контроля

detectionris k риск (не)обнаружения

approval of the financial statements подтверждение финансовой отчетности

deviation отклонение

unqualified op inion безусловное мнение (оценка, заключение)

to qualify the opinion дать аудиторское заключение с оговорками

integrity добросовестность, профессиональная честность

certify выдавать свидетельство

to conduct ai* audit проводить аудиторскую проверку

generally accepted auditing standards общепринятые стандарты аудита

4. Нығайту:

Закрепление:

TEXT

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 up a significant amount of expertise in per-

forming financial statements audits.

Accounts audits \ vere 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 boards, employee representatives,

government agencies may sometimes need an in-depth audit report, which is

usually confidential.

It should be stressed that auditors do not monitor, they offer an opinion, and the

audit process and audit procedures are complicated and manifold. 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 company 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 misstatement whether it is intentional or uninten-

tional. The management is responsible for the reliability of financial position. 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 ac-

counting 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 critical elements

in the auditor's judgement. "Materiality" refers to the magnitude or nature of a misstatement (including an omission) of financial information.

"Audit risk" (including three different components - inherent risk, control risk, de-

tection risk) is the risk that an auditor may give an appropriate opinion on financial

information that is materially misstated.

The natural fmalization 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 opinion.

In order to protect the public interests and the profession's integrity an individual

must be sufficiently educated and adequately trained before being certified to act as an auditor.

Answer the questions on the text:

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 analyze financial statements?

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

8. What are the responsibilities of auditors?

9. Do auditors study and evaluate the accounting system and the internal ac-

counting 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 audi-

tors sometimes disclaim or qualify their opinion?

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?

14. What were the auditors responsible for?

15. What opinion was expressed?