Text 2 setting accounting and auditing standards internationally

Exercise 2.1

Study the vocabulary:

1	accurate	1	точний
2	analogy	2	аналогія, схожість
3	acceptable	3	прийнятний
4	audit	4	аудит
5	assure	5	гарантувати
6	certified	6	дипломований
7	chartered accountant	7	незалежний бухгалтер
8	comparability	8	порівнянність
9	conformity	9	узгодженість, адекватність; схожість
10	contain	10	містити
11	define	11	визначати
12	evidence	12	дані, факти, ознаки
13	extent	13	ступінь, міра
14	to form an opinion	14	формувати думку
15	GAAP(generally accepted accounting principles)	15	Загальноприйняті принципи бухгалтерського обліку
16	Ingredient	16	складова, компонент
17	Interrelated	17	взаємопов’язаний
18	Inherent	18	властивий, притаманний
19	Message	19	повідомлення
20	to result in	20	призводити до чого-небудь

Exercise 2.2

Read the text to find out how accounting and auditing standards are interrelated:

Accounting standards are the rules for preparing financial statements. They are called generally accepted accounting principles and they specify: first, the type of information that financial statements ought to contain; and second, how that information ought to be prepared. Accounting standards define what acceptable and unacceptable financial accounting practices are.

Auditing standards are the rules governing how an audit is performed. An audit of financial statements is the technical process by an independent person (the auditor) gathers evidence to form an opinion about the conformity of financial statements to GAAP. In most countries a particular group of accountants is legally sanctioned to conduct financial statement audits. In the US, for example, it is the certified public accountants (CPA). In the United Kingdom it is the chartered accountants, in the Netherlands, the register accountant etc. Financial statements conforming to GAAP are said to be reliable. To put it differently, they provide reliable information which is an important ingredient in good decision making.

Accounting standards and auditing standards are interrelated. Accounting standards presumably define what useful financial information is. Auditing standards guide an auditor in determining whether it is also reliable. Useful and reliable financial information puts investors, creditors and others in a position to make better decisions.

Accounting has been called the language of business. That analogy is accurate, since accounting is a form of communication. As with all types of communication, though, misunderstandings can arise unless meanings are reasonably clear.

It should be remembered that accounting reflects the environment in which it operates. And since environments differ around the world it follows that accounting will also be different around the world.

Unfortunately, this diversity of accounting practices results in a general lack of comparability in financial reports from one country to the next. As a result, there is a risk of misunderstanding when financial statements are communicated transnationally. Problems may arise for both users and preparers there.

The problem of different auditing standards is more subtle. Fundamentally, an audit assures users that they can trust the information communicated by the financial statements. However, if auditors around the world are not comparably trained or if they do not observe comparable standards, then their work varies in quality. As a result the inherent reliability of financial statements also varies.

The existence of different accounting and auditing standards affects the decisions of resource providers to the extent that they fail to understand or trust the messages communicated by financial statements. A number of international and regional organizations recognize this problem and are trying to harmonize accounting and auditing standards to the greatest extent possible.

Exercise 2.3

Match the English words with their Ukrainian equivalents:

	Audit	a)	дані, факти, ознаки
	Conformity	b)	ступінь, міра
	Evidence	c)	Аудит
	Extent	d)	складова, компонент
	Ingredient	e)	узгодження, схожість

Exercise 2.4

Match the English words on the right with their definitions on the left:

	Audit		a fundamental or general truth, law or standard
	Message		a comparison made to show a similarity
	Extent		data on which to base proof or to establish truth or falsehood
	Principle		an inspection, correction and verification of business accounts conducted by an independent qualified accountant
	Ingredient		a component of a mixture
	Conformity		agreement or similarity, especially in a certain limited number of features or details
	Evidence		a person qualified to audit accounts
	Comparability		a communication, usually brief, from one person or group to another
	Analogy		compliance in actions, behaviour,etc., with certain accepted standards or norms
	Auditor		the range over which something extends; scope

Exercise 2.5

Read the text again and put the jumbled words into a correct order:

1. the rules, financial, statements, Accounting, are, for preparing, standards.

2. standards, the rules, how, governing, is, an audit, performed, Auditing, are.

3. standards, and, are, Accounting, interrelated, standards, auditing.

4. has, been, the language, Accounting, of, business, called.

5. statements, GAAP, Financial, to, conforming, are, to be, said, reliable.

Exercise 2.6

Read the text once again and rearrange the sentences into a chronological order:

1. It should be remembered that accounting reflects the environment in which it operates.

2. An audit of financial statements is the technical process by an independent person (the auditor) gathers evidence to form an opinion about the conformity of financial statements to GAAP.

3. Accounting standards presumably define what useful financial information is.

4. Accounting standards define what acceptable and unacceptable financial accounting practices are.

5. The existence of different accounting and auditing standards affects the decisions of resource providers to the extent that they fail to understand or trust the messages communicated by financial statements.