12.What is auditing and why is it necessary?

Auditing is a systematic method of objectively obtaining, analyzing and evaluating financial statements and its underlying record in order to validate evidence regarding assertions about economic actions and events.

Audits are a necessary tool to monitor and maintain the health of management systems. Audits are used to determine the extent management systems conform to requirements and whether they have been effectively implemented and maintained. Requirements may be: -  Stated by your customers, -  Defined by your policies and procedures, -  Stipulated in government regulations, -  Established as industry standards, or -  Specified in the applicable management system standards.

Generally, there are two main kinds of accounting. There is financial accounting and there is auditing. Financial accounting normally involves processing of financial information regarding a business operation where details are documented, organized, summarized, interpreted and finally communicated.

Auditing, on the other hand, is there process that an independent auditor checks accounting records and financial statements in order that he or she could express a professional opinion regarding the financial records and answer queries regarding projections.

13.What are the three key financial statements that companies include in their annual reports?

Annual reportsare special financial documents used to provide a summary of operations and financial standing of a company or organization. They may also include other special information about the company including its mission, future plans, profiles of key management or staff.

Generally, an Annual Report must include: (a) a profit and loss account within the Annual Report (b) a balance sheet signed by a director within the Annual Report; (c) an auditors' report signed by the auditor within the Annual Report (if appropriate); (d) a directors' report signed by a director or the secretary of the company; notes to the Annual Report; and (e) group Annual Report (if appropriate).

The three financial statements included in all reports include the income statement and balance sheet, as well as a statement of cash flows.

Proposalsare another type of report that companies may produce for perspective clients or investors. They may be formal or informal.

14. What are the functions of a central bank?

A Central Bank or reserve bank, by definition, is the organization within a specific country or coalition of countries that regulates all of the currency supplies and related policies for that particular area.

Central banks take deposits from other banks and, in certain cases, from foreign governments which deposit their foreign exchange and gold reserves for safekeeping (for instance, with the Federal Reserve Bank of the USA). The Central Bank invests the foreign exchange reserves of the country while trying to maintain an investment portfolio similar to the trade composition of its client - the state. The Central bank also holds onto the gold reserves of the country. Most central banks have lately tried to get rid of their gold, due to its ever declining prices.

Functions of a central bank (not all functions are carried out by all banks):

• implementing monetary policy

• controlling the nation's entire money supply

• the Government's banker and the bankers' bank ("lender of last resort")

• managing the country's foreign exchange and gold reserves and the Government's stock register

• regulating and supervising the banking industry

• setting the official interest rate – used to manage both inflation and the country's exchange rate – and ensuring that this rate takes effect via a variety of policy mechanisms

14. What is the aim of monetary policy and how does it work?

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment. Monetary theory provides insight into how to craft optimal monetary policy.

14. What are the common ways of financing international trade and which of them is safer for the seller?

In foreign trade, a lot of attention is paid to safeguarding payment.

There are two basic forms of finance of international trade transactions: import finance and export finance. Both can be performed in the currency of the exporter (for example, Euros) or in any other fully convertible currency agreed by both parties. In the second case the company assumes certain risks as to the difference in exchange rates, however, it can also profit from trading in another currency if there is a rise in the value of the foreign currency. Financial transactions in international trade can be performed in the currency of the exporter, in the currency of the importer or in a third currency.