Auditing (Аудит)

Audit is defined as a procedure of official checking and examination of annual financial statements of a business or government organization, or of a person’s accounts by a qualified person – an auditor. Depending on the type of audit, the involved expert may operate as an independent person, or may as well represent an independent audit committee and work in a group as is the case with an external audit or public auditing. In some large companies, a method of continuous audit is adopted, which is conducted by an internal accounting specialist who is not responsible for preparing financial documentation under audit. The audit may also be classified as financial statements audit, income tax audit, “value for money audits”, environmental audits, financial management audit, etc.

The purpose of an external audit is to make certain that a person, a legal entity, or an organization shows accurately the true financial position in the proper form required by law or regulation of the state, in accordance with acceptable accounting principles, and does not hide any dishonesty. In fact, external audit is intended to provide shareholders, bankers, government agencies, etc. with useful and reliable information about finance managing in the business enterprise under audit. Auditors do not monitor the financial transactions of a business, nor do they have any legal powers. They only offer an opinion in final auditor’s report which gives credibility to the financial statements, or reveal undesirable practices to prevent their recurring in the future. In certain public companies audits help to test the effectiveness of internal control over financial reporting.

Auditing procedures are complicated, manifold and based on national or international auditing standards which differ for audits of public companies, private enterprises, government organizations and entities that receive government funds. For the audit to be performed effectively, the auditor should properly plan the audit and direct efforts to areas most expected to contain risks of material misstatement due to error or fraud. As a rule, these areas include transactions, account balances, presentations and disclosure. An external auditor is assisted by a person within the entity, whom the auditor properly supervises.

First of all, the auditor should obtain an understanding of the enterprise, its environment and internal control system. The next step is to analyze the financial statements of an enterprise prepared by its management, identify and assess the risks of material misstatement. For this purpose the auditor designs audit procedures or uses testing and other means of examining all information that is available to obtain sufficient appropriate audit evidence that misstatements do not exist (or exist). In some cases, the complete information is not provided by the management intentionally or unintentionally, or concealed fraud may be undetectable with auditor procedures, which present inherent limitations of an audit and cause audit risk.

Nowadays the scope of auditors’ skills is much wider, as they not only analyze the firm’s financial statements, but also render a wide range of consultancy services, help their clients to prepare tax returns, give advice on the maintenance of accounting and organization of internal control. In English-speaking countries, public auditors are usually certified, and high standards of professional qualification are encouraged. There are also government auditors addressing the key problems in the field of public accounting sector auditing, budget efficiency problems, performance of expenditure programmes, etc.

Read the text and discuss in group the significance of auditing for evaluating a successful performance of a business enterprise.

Work in pairs. Ask questions summing up the main subject, key points, and supporting details presented in the text. Collect data to answer the questions. Organize your questions and answers in the form of a conversation.

Summary writing

1. Read the text again and determine the main idea of each paragraph.

2. Underline the key words and collocations.

3. Put the main ideas into your own words. Try to use all the underlined words and collocations.

4. Organize the key points in the form of a plan.

5. Make a summary. Your summary should reflect the key points and the supporting details in a condensed form.