International standards

In the UK, the way accounts are presented is governed by regulators such as the Financial Reporting Council (FRC).

In the US, they have the Generally Accepted Accounting Principles (GAAP), promoted by the Financial Accounting Standards Board (FASB).

People and institutions invest in companies worldwide. Therefore it's important for financial reporting to be in a form that means the same thing to people all over the world. That's why accountants worldwide are moving towards International Financial Reporting Standards (IFRS).

These standards will eventually be accepted by the International Organization of Securities Commissions (IOSCO) representing stock markets all over the world, including the all-important Securities and Exchange Commission (SEC) in the US. This will facilitate investment by allowing investors from every continent to understand the accounts of companies, and to trust them, wherever they are based.

2. Scan the text again to answer the following questions:

1) What is the broad definition of auditing?

2) Why are financial statement audits performed and what are the various benefits derived from them?

3) What is the difference between financial statement auditing, compliance auditing and operational auditing?

4) What are the peculiarities of the work of external auditors, internal auditors and government auditors?

5) What are the four conditions that create a demand for auditing?

6) What International Standards are there in the UK and in the USA?

DEVELOPING VOCABULARY

1. Number the following words or expressions with their underlined equivalents in the text:

accuracy (1), Annual General Meeting, board of directors, checking, deficiencies, determine, deviations, directives, external, implemented, ratified, shareholders (GB) or stockholders(US), standard operating procedures, subsidiaries, a synonym, transnational corporations

The traditional definition of auditing is a review and an evaluation of financial records by a second set of accountants. An internal audit is a control by a company's own accountants, checking for completeness, (1) exactness and reliability. Among other things, internal auditors are looking for (2) departures from (3) a firm's established methods for recording business transactions. In most countries, the law requires all firms to have their accounts audited by an outside company. An (4) independent audit is thus a review of financial statements and accounting records by an accountant not belonging to the firm. The auditors have to (5) judge whether the accounts give what in Britain is known as a "true and fair view" and in the US as a "fair presentation" of the company's financial position. Auditors are appointed by a company's (6) most senior executives and advisors, whose choice has to be (7) approved by the (8) owners of the company's equity at the (9) company's yearly assembly. Auditors write an official audit report. They may also address a "management letter" to the directors, outlining (10) inadequacies and recommending improved operating procedures. This leads to the more recent use of the word "audit" as (11) an equivalent term for "control": (12) multinational companies, for example, might undertake inventory, marketing and technical audits. Auditing in this sense means (13) verifying that general management (14) instructions are being (15) executed in branches, (16) companies which they control, etc.

2. Add appropriate words to these phrases:

1) Auditors ........ companies' accounts.

2) Accounts have to ......... a fair presentation.

3) Auditors write a ......... .

4) It's the directors who ......... the auditors.

5) Auditors sometimes ......... better accounting procedures.

6) Using external auditors is a ......... requirement.

3. Fill in the gaps to complete the passage, choosing from the list of words. The first one has been done for you.

accounts, books, receipts, public, firms, stocks, write down, depreciate, Companies, VAT, reconcile, invoices, auditors, Exchange, annual

An official examination, the audit, is made of the (1) ..accounts.. of a business;this is usually done once each year. Independent (2) ....... descend on a company and examine all the company's accounts for the previous year; this is known, colloquially, as "checking the (3) .......". The auditors attempt to (4) ...... all the bank statements, checking them against the (5) ....... and (6) ....... . They check all the company's (7) ......; if the value of any of them has decreased during the year, they 8) ....... its value to a realistic one - many items (9) ...... with time and use. Although (10) ....... returns have to be submitted to the Customs and Excise authorities every three months, they are checked again during the audit. A (11) ...... company-one of which the shares are quoted on the Stock (12) ...... - must lodge its accounts in (13) ....... House, where they are available to the public, and to possible investors. The (14) ....... audit is a legal requirement in Britain; many professional (15) ....... of accountants only do this work and do not need to undertake any other type of work.

4. Match the terms (1 -14) on the left with the correct definition (a-n) on the right.

1) statutory audit 2) continuous audit 3) Memorandum of Association 4) Articles of Association 5) walk through test 6) compliance test 7) substantive test 8) teeming and lading 9) auditor 10) prior period 11) audit assignment 12) corroborate 13) statistical sampling 14) consecutive numbers

a. official document stating the internal rules of the company b. following one after the other without a break c.this checks that controls are operating effectively d. required by law e. money received from one debtor is wrongly recorded to another f. regulates the company's relationship with the public g. testing a small number of representative items h.carried out all the time i. following documents or transactions through the system j. piece of work you are given to do k. careful study of all the details l. accountant who examines a firm's accounts m. previous length of time n. make sure it's true with more information

DISCOVERING LANGUAGE

1. Fill in the missing prepositional phrases in the following sentences. Choose from the list of words:

agree with blame for caused by difference between in line with insist on reason for refer to responsible for suspicious of

1) The auditor discovered that there was a difference between the cash book and the

bank balance.

2) If the entries in the accounts are not clear, he can ________ the original invoices.

3) You must ________ an official signature on all large orders.

4) The auditor must check that the records are ________ the company requirements.

5) The auditor must ask the ________ any large discounts or allowances.

6) The auditor is ________ checking the reason for any changes in the accounts.

7) The authorities will ________ the auditor ________ any mistakes in the accounts.

8) The auditor must check that the purchase invoices ________ the entries in the Purchases Journal.

9) The auditor should be ________ any short-cut methods of correcting errors.

10) Mistakes may be _______ the wrong steps used in the original accounting process.

2. Translate the italicized parts of the sentences from Russian into English. Pay attention to conjunctions, introducing subordinate clauses. Define the types of conditionals.

1) If the company's business is profitable, он будет привлекать больше вложений от кредиторов и акционеров.

2) If the available resources had been used economically, они покрыли бы издержки производства и обеспечили бы более высокие прибыли.

3) Если бы долгосрочный план развития производства не был разрaботан заранее, the efficiency of the management would be lower.

4) The net loss of the company would be lower, при условии, что основные активы использовались бы рационально.

5) Unless the financial statements are published, налоговые организации и другие заинтересованные группы не смогут оценить финансовое положение компании.

6) Если бы морально устаревшее оборудование не заменялось вовремя, the company's produce wouldn't be competitive in the market.

7) Provided the total amount of revenues and expenses had been calculated, бухгалтер определил бы доход компании.

8) The company could employ more qualified workers, если бы имела на рынке более высокую репутацию, чем конкуренты.

9) The agriculturists would have had smaller losses, если бы не жаркая сухая погода летом.

10) The situation will lead to hyperinflation in the country, при условии что не будет жесткого правительственного контроля за движением наличности на рынке.

FOCUS ON FUNCTIONS

Logical Connectors

Logical connectors are linking words and phrases which establish the logical relationship between ideas within a sentence or between sentences. They also improve the flow of writing, that is a smooth movement from one idea or piece of information in a text to the next. Logical connectors are thus guideposts for readers that help them to better follow the text. As transitional expressions show various kinds of logical relations, they may be grouped according to their meaning and function.

1. Below is a list of some widespread logical connectors. Group them into their functions according to Table 1. Several connectors may have more than one meaning.

Accordingly, although, as, as a matter of fact, as a result, as far as, as long as, as to, at the same time, because of, consequently, conversely, despite, due to, even though, finally, firstly, for example, for instance, furthermore, hence, however, in addition, in brief, in conclusion, in contrast, in fact, in other words, in spite of, in this case, likewise, meanwhile, moreover, nevertheless, nonetheless, notwithstanding, on the contrary, on the other hand, on the whole, otherwise, overall, regarding, similarly, since, that is (i.e.), therefore, thus, whereas, while

Table 1. Functions of Logical Connectors

Function	Connectors
Addition	furthermore,
Cause and effect	because of,
Comparison	likewise,
Concession	nevertheless,
Conclusion	therefore,
Contrast	on the other hand,
Enumeration	firstly,
Illustration	for example,
Intensification	as a matter of fact,
Reformulation	in other words,
Relation	regarding,
Summation	overall,
Time	meanwhile,

2. Insert the appropriate words into the sentences:

thus, although, because of, because, so, but, if, while, however, since

1) ... rising prices the company stock-in-trade has increased in value.

2) Capital borrowing has become easier ... the government wants to stim­ulate the economy.

3) Bond & Co. doesn't seem to be doing very well, ... its goodwill is falling.

4) They are said to have employed a new Managerial Accountant, ... they don't expect an immediate improvement in supporting the management decision-making process.

5) The company's balance sheet appeared to be satisfactory, ... within six months it went bankrupt.

6) ... bank loans are a common source of long-term credit, short-term investment is usually financed in other ways.

7) Often the two sides of a balance sheet may not be in balance, ... additional information should be taken into account, such as sale of assets, repayment of loans, payments of dividends and taxation.

8) ... the balance sheet consists of three major sections, their arrangement varies from country to country.

9) ... the company doesn't earn the reasonable net worth, the stock price will fall and ... make it difficult to attract additional capital.

LISTENING

1. You are going to listen to the recording of the text “Time to clarify the obligations of Auditors”. Judging from the headline of the text do you think its tone will be favourable to, or critical of, present auditing practices? Listen to the recording to check your opinion.

While listnening get ready to answer the following questions:

1) Do the authors think the suggestions for reform of auditing proposed by other European Community states are satisfactory?

2) How many main areas of discussion are there in this text? One, three or five?

3) On the basis of your answer to the previous question, choose from the following the area(s) you think the text discusses:

● Auditing's theoretical functions.

● The problem of ensuring honest auditing.

● The types of legal punishment needed for dishonest audits.

● Possible ways of ensuring honest audits.

● The reasons why auditors are in a difficult position.

2. Listen to the text again and try to match together the words from A with those in B to form the collocations which you think occurred together in the recording:

A. pose, the root of, to work, legal, ripe for, price, transition, intensity of, holds, addresses

B. redress, competition, the debate, premium, the problem, period, reform, problems, no water, on its behalf

3. Match the words with their correct definitions.

Words: beneficiaries, diverge, safeguard, malpractice, gulf, sustain, periodic, rotation, disruption, scrutiny

Definitions: dishonest/illegal behaviour, disturbance/upset, careful inspection, those who gain from an action/event, change, protect, become different, from time to time, maintain, gap/wide space