Text 4 auditing and auditors

Exercise 4.1

Study the vocabulary:

1	may be defined	1	може бути визначений
2	to rely	2	покладатися, довіряти
3	credible	3	гідний довір'я
4	sizable loans	4	велика позичка
5	professional opinion	5	висновок фахівця
6	the main objective	6	головна задача
7	the distinction	7	відмінність
8	limited capability	8	обмежені здібності
9	auditing	9	аудит, ревізія
10	different objectives	10	різні завдання
11	tempting	11	спокусливо
12	prove cash balances	12	підверджувати баланс готівки
13	financial statements	13	фінансові звіти
14	in accordance with	14	у відповідності з
15	to confirm	15	підтверджувати

Exercise 4.2

Read and translate the text:

Auditing may be defined as the examination and testing of financial statements. In all countries of the world society relies heavily auditors for financial reports. In Britain, for example, all public corporations and many companies applying for sizable loans must have their statements audited. The main objective of auditing is to give the auditor's professional opinion as to whether the company's financial reports correctly present its financial position. Auditors are known to check and test all accounting records. In order to do that they must prove cash balances, confirm physical inventories and verify the amounts owed by customers. Apart from that auditors must also decide whether the company's records are kept in accordance with accepted accounting practice.

It should be said that an audit can start only once necessary accounting work has been completed. However, in practice, especially in the case of small companies, the distinction, between auditing and accounting work is not clearly appreciated. This is determined by the fact, that small companies have very often limited book-keeping capabilities. So, it is always tempting for them to leave things to the auditor to complete. It should be clearly understood that preparation or completion of accounts is the accountant's task and not the auditor's.

Thus, although many accountants readily undertake both accounting and audit work, these tasks are undertaken with different objectives in view. It would, however, be quite wrong to infer from this that accounts preparation work provides no audit assurance. It is now generally accepted that the assurance derived by auditors from preparing accounts contributes greatly to the overall assurance required. And that in its turn allows reduced testing in other areas.

Exercise 4.3

Read the text again and choose the best answer to the question:

1. How may auditing be defined?

Auditing may be defined as …

a) the preparation and checking of financial statements.

b) the examination and checking of financial records.

c) the examination and testing of financial statements.

2. What is always expected from auditors?

In all countries of the world society relies heavily auditors for …

a) financial reports.

b) financial data.

c) accounting information.

3. What is the condition for receiving sizable loan?

All public corporations and many companies applying for sizable loans …

a) must have their accountants audited.

b) must have their balance sheets audited.

c) must have their statements audited.

3. What is the main objective of auditing?

The main objective of auditing is to give the auditor's professional opinion …

a) as to whether the company's financial reports correctly present its financial position.

b) about future business plans.

c) as to whether the company's annual balance correctly present its current financial position.

3. What must auditors do to check and test accounting records?

In order to do that they must …

a) prepare cash flow forecast, confirm physical inventories and verify the amounts owed by accountants.

b) accept cash balances, confirm physical inventories and verify the amounts owed by accountants.

c) prove cash balances, confirm physical inventories and verify the amounts owed by customers.

3. Is preparation and completion of accounts an auditing task?

It should be clearly understood that preparation or completion of accounts …

a) is the accountant's task and not the auditor's.

b) both the accountant's task and the auditor's.

c) nether the accountant's task nor the auditor's.

Exercise 4.4

Fill in the gaps. Then read and translate:

accepted main public financial position confirm test loans society opinion

Auditing may be defined as the examination and testing of …1… statements. In all countries of the world …2… relies heavily auditors for financial reports. In Britain, for example, all …3… corporations and many companies applying for sizable …4… must have their statements audited. The …5… objective of auditing is to give the auditor's professional …6… as to whether the company's financial reports correctly present its financial …7… . Auditors are known to check and …8… all accounting records. In order to do that they must, prove cash balances, …9… physical inventories and verify the amounts owed by customers. Apart from that auditors must also decide whether the company's records are kept in accordance with …10… accounting practice.

Exercise 4.5

Match the term with the definition:

1	a report	a	a statement, assertion, etc., intended to inspire confidence or give encouragement
2	a loan	b	having a limit; restricted; confined
3	an opinion	c	to examine, investigate, or make an inquiry into (facts, a product, etc.) for accuracy, quality, or progress, esp rapidly or informally
4	a record	d	an account prepared for the benefit of others, esp. one that provides information obtained through investigation
5	to check	e	judgment or belief not founded on certainty or proof
6	to confirm	f	an account in permanent form, esp. in writing, preserving knowledge or information about facts or events
7	limited	g	to prove to be true or valid; corroborate; verify
8	assurance	h	property lent, esp. money lent at interest for a period of time
9	auditor	i	the quality of being capable; ability
10	capability	j	a person qualified to audit accounts