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Тексты, диалоги в билетах
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Тема: Тексты, диалоги в билетах
Раздел: Бесплатные рефераты по английскому языку
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UNIT 2
The accounting profession
Positions in the field of accounting may be divided into .several areas. Two general classifications are public accounting and private accounting. Public accountants are those who serve the general public and collect professional fees for their work, much as doctors and lawyers do. Their work includes auditing, income tax planning and preparation, and management consulting. Public accountants are a small fraction (about 10 percent) of all accountants. Those public accountants who have met certain professional requirements are designated as Certified Public Accountants (CPAs).
Private accountants work for a single business, such as a local department store, the McDonald's restaurant chain, or the Eastman Kodak Company. Charitable organizations, educational institutions, and government agencies also employ private accountants. The chief accounting officer usually has the title of controller, treasurer, or chief financial officer. Whatever the title, this person usually carries the status of vice-president.
Some public accountants pool their talents and work together within a single firm. Most public accounting firms are also called CPA firms because most of their professional employees are CPAs. CPA firms vary greatly in size. Some are small businesses, and others are medium-sized partnerships. The largest CPA firms are worldwide partnerships with over 2,000 partners. Such huge firms are necessary because some of their clients are so large and their operations are so complex. For instance, Price Waterhouse, one of the eight largest American CPA firms, has reported that its annual audit of one particular client would take one accountant 630,720 hours of effort - that equals 72 years of nonstop work! Another Price Waterhouse client owns 300 separate corporate entities. All their records are combined into a single set of financial statments. Such time consuming tasks make a large staff of accountants a necessity.
PUBLIC ACCOUNTING
Auditing is the accounting profession's most significant service to the public. An audit is the independent examination that assures the reliability of the accounting reports that management prerares and submits to investors, creditors, and others outside the business. In carrying out an audit, CPAs from outside a business examine the business's financial statements. If the CPAs believe that these documents are a fair presentation of the business's operations, the CPAs give a professional opinion stating that the firm's financial statements are in accordance with generally accepted accounting principles, which is the standard. Why is the audit so important? Creditors considering loans want assurance that the facts and figures the business submits are reliable. Stockholders, who have invested in the business, need to know that the financial picture management shows them is complete. Government agencies need accurate information from businesses.
Tax accounting has two aims: complying"with the tax laws and minimizing taxes to be paid. Because income tax rates range as high as 28 percent for individuals and 34 percent for corporation, reducing income tax is an important management consideration. ' Tax work by accountants consists of preparing tax returns and planning business transactions in order to minimize taxes. CPAs advise individuals on what types of investments to make and on how to structure their transactions.
Management consulting is the catcall term that describes the wide scope of advice CPAs provide to help managers run a business. As CPAs conduct audits, they look deep into a business's operations. With the insight they gain, they often make suggestions for improvements in the business's management structure and accounting systems. (We discuss these areas of accounting in the next section). Management consulting is the fastest-growing service provided by accountants.
PRIVATE ACCOUNTING
Cost accounting analyzes a business's cost to help managers control expense. Traditionally, cost accounting has emphasized manufacturing costs, but it is increasingly concerned with the cost of selling the goods. Good cost accounting records guide managers in pricing their products to achieve greater profits. Also, cost accounting information shows management when a product is not profitable and should be dropped.
Budgeting sets sales and profit goals and develops detailed plans - called budgets - for achieving those goals. Many companies regard their budgeting activities as one of the most important aspects of their accounting systems. Some of the most successful companies in the United States have been pioneers in the field of budgeting - Procter & Gambele and General Electric, for example.
Information systems design identifies the organization's information heeds, both internal and external. It then develops and implements the system to met those needs. Accounting information systems help control the organization's operations. Flow charts and manuals that describe the various functions of the business and the placement of responsibility with specific employees are parts of system design.
Internal auditing is performed by a business's own accountants. Many large organizations - Motorola, Bank of America, and 3M among them - maintain a staff of internal auditors. These accountants evaluate the firm's own accounting and management systems. Their aim is to improve operating efficiency and to ensure that employees and departments follow management's procedures and plans.
Financial accounting provides information to people outside the firm. Creditors and stokholderd, for example, are not part of the day-to-day management of the company. Likewise, government agencies, such as the SEC, and the general public are external users of a firm's accounting information.
Management accounting generates confidential information for intenal decision makers, such as top executieves, department heads, college deans, and hospital administrators.
UNIT 3
The accounting equation and the balance sheet
Accounting is often said to be the language of business. It is used in the business world to describe the transactions entered into by all kinds of organizations. Accounting terms and ideas are therefore used by people associated with business, whether they are managers, owners, investors, bankers, lawyers, or accountants. As it is the language of business there are words and terms that mean one thing in accounting, but whose meaning is completely different in ordinary language usage. Fluency comes, as with other languages, after a certain amount of practice. When fluency has been achived, that person will be able to survey the transactions of businesses, and will gain a greater insight into the way that business is transacted and the methods by which business decisions are taken.
The actual record-making phase of accounting is usually called book-keeping. However, accounting extends far beyond the actual making of records. Accounting is concerned with the use to which these records are put, their analysis and interpretation. An accountant should be concerned with more than the record-making phase. In particular he should be interested in the relationship between the financial results and the events which have created them. He should be studying the various alternatives open to the business, and be using his accounting experience in order to aid the management to select the best plan of action for the business. The owners and managers of a business will need some accounting knowledge in order that they may understand what the accountant is telling them. Investors and others will need accounting knowledge in order that they may read understand the financial statements issued by the business, and adjust their relationships with the business accordingly.
Probably there are two main question that the managers or owners of a business want to know: first, whether or not the business is operating at a profit; second, they will want to know whether or not the business will be able to meet its commitments as they fall due, and so not have to close down owing to lack of funds. Both of these questions should be answered by the use of the accounting data of the firm.
UNIT 4
The double - entry system for assets and liabilities.
It has been seen that each transaction affects two items. To show the full effect of each transaction, accounting must therefore show its effect on each of the two items, be they assets, capital or liabilities. From this need arose the double-entry system where to show this twofold effect each transaction is entered twice, one to show the effect upon one item, and a second entry to show the effect upon the other item.
It may be thought that drawing up a new balance sheet after each transaction would provide all the information required. However, a balance sheet does not give enough information about the business. It does not, for instance, tell who the debtors are and how much each one of them owes the firm, nor who the creditors are and the details of money owing to each of them. Also, the task of drawing up a new balance sheet after each transaction becomes an impossibility when there are many hundreds of transactions each day, as this would mean drawing up hundreds of balance sheets daily. Because of the work involved, balance sheets are in fact only drawn up periodically, at least annually, but sometimes half-yearly, quarterly or monthly.
The double-entry system has an account (meaning details of transactions in that item) for every asset, every liability and for capital. Thus, there will be a Shop Premises Account (for transactions in shop premises), and so on for every asset, liability and forcapital.
Each account should be shown on a separate page. The double-entry system divides each page into two halves. The left-hand side of each page is called the debit side, while the right-hand side is called the credit side. The title of each account is written across the top of the account at the centre.
It must not be thought that the worlds "debit" and "credit" in book-keeping mean the same as the words "debit" or "credit" in normal language usage. Anyone who does will become very confused.
If you have to make an entry of $10 on the debit side of the account, the instructions could say "debit the account with $10" or "the account needs debiting with $ 10".
PART III
AUDITING
Different types of audits and the purposes of audits have evolved over many years, and this evolution is still taking place. Accordingly, auditing should be defined broadly enough to cover the various types and purposes of audits. The definition of auditing that appeared in A Statement of Basic Concepts, published in 1973 by the American Accounting Association (AAA) Committee on Basic Auditing Concepts, embraces both the process and purposes of auditing.
Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.
The AAA Committee noted that its definition was intentionally quite broad to cover "the many different purposes for which as audit might be conducted and the variety of subject matter that might be focused on in a specific audit engagement". The following discussion of each key phrase in the definition is couched primarily in the context of an audit of the financial statements of a business organization, usually referred to as a financial audit.
Assertions About Economic Actions and Events. The assertions of management that are embodied in a set of financial statements are the subject matter of an audit of those statements. For example, the item "inventories ... $5,426,000" in a balance sheet of a manufacturing company embodies the following assertions, among others: The inventories physially exist; they are held for sale or use in operations; they include all products and materials; $5,426,000 is the lower of their cost or market value (as both terms are defined under generally accepted accounting principles); they are properly classified on the balance sheet; and appropriate disclosures related to inventories have been made, such as their major categories and amounts pledged or assigned. Comparable assertions are embodied in all the other specific items and amounts in financial statements. Those assertions can be conveniently grouped into a few broad categories.
The assertions are made by the prepaper of the financial statements - management - and communicated to the readers of the statements; they are not assertions by the auditor. The auditor's responsibility is to express an opinion on management's assertions in the context of the financial statements taken as a whole, and to communicate that opinion to the readers in the form of the auditor's report. Similar assertions are also the subject matter of compliance and performance audits.
Since the subject matter of auditing usually is information about economic actions and events, assertions must be quantifiable to be auditable. Building costs are quantifiable, as is the number of stock options outstanding; the morale of employees is not. Information that is quantifiable is also generally verifiable; information that is not verifiable is by definition not auditable. Information is verifiable if it "provides results that would be substantially duplicated by independent measures using the same measurement methods".
Origins and Early History of Auditing
Historians believe that record keeping originated about 4000 b.c, when ancient civilizations in the Near East began to establish organized governments and businesses. From the beginning, governments were concerned with accounting for receipts and disbursements and collecting taxes. An integral part of this concern was establishing controls, including audits, to reduce errors and fraud on the part of incompetent or dishonest officials. Several "modern" forms of internal control are described in the Bible, which is generally viewed as covering the period between 1800 b.c. and a.d. 95, and the explanation of the logic behind instituting controls - that if employees have an opportunity to steal they may take advantage of it - reflects the same professional skepticism expected of auditors today. Specifically, the Bible discusses dual custody of assets, the need for competent and honest employees, restricted access, and segregation of duties.
The government accounting system of the Zhao dynasty (1122-256 b.c.) in China included an elaborate budgetary process and audits of all government departments. In fifth-century b.c. Athens, the popular Assembly controlled the receipt and disbursement of public funds. The public finance system included government auditors who examined the records of all officeholders at the expiration of their terms. In the private sector, managers of estates conducted audits of the accounts. Public finance in the Riman Republic was under control of the Senate, and public accounts were examined by a staff of auditors supervised by the treasurer. The Romans maintained segregation of duties between the officials who authorized taxes and expenditured and those who handled receipts and payments, and, like the Greeks, devised an elaborate system of checks counterchecks.
Historical Development of External Auditing
in the United States
The development of external auditing in this country owes much to the various Companies Acts enacted in Britain during the second half of the nineteenth century. Before 1850, audits were a minor part of an accountant's practice and were not routinely performed. When they were performed, they were viewed as a way to make managers and directors accountable to absentee stockholders for the stewardship of assets. The auditor's primary objective was the detection of fraud. Moreover, there were no standards governing what the examination should consist of or the qualifications of those performing it. The Companies Acts aimed to establish auditing andreporting standards, beginning with the 1845 Act, which required that one or more of a company's stockholders be appointed to audit the balance sheet but did not address the issues of qualifications or responsibilities. The Companies Acts of 1855-1856 removed the requirement that auditors had to be stockholders and thus gave companies the option of engaging an external auditor. In addition, a petition by 20 percent of the stockholders could compel a company to appoint an external auditor. This was the first step toward compulsory independent audits. The Act of 1862 included a detailed description of an audit examination, as well as the first standard form of the auditor's report. It took until 1900, however, for annual audits to become mandatory for all limited companies. Standards for qualification of auditors, however, along with accounting and disclosure requirements, were not incorporated into British regulations until the twentieth century. The first comprehensive text on auditing, Auditing: A Practical Manual for Auditors, by Lawrence R.Dicksee, was published in England in 1892. Independendent audits in the United States up to the turn of the century were modeled on British practices. The audit work consisted of detailed scrutinies of clerical data relating to the balance sheet. Robert H.Montgomery, in the first edition of this book, called the early American audits "bookkeeper audits", and the estamated that three quarters of the audit time was spent on footings and postings. Since there were no statutory requirements for audits in America, and since most audits were performed by auditors from Britain who were sent by British investors in U.S. companies, the profession grew slowly at first. Only a small amount of auditing literature was published in the United States
prior to the 1900s. H.J. Mettenheim's 16-page work entitled Auditor's Guide (1869) contained suggestions for preventing fraud and instructions for auditing cash. Science of Accounts by G.P.Greer, published in 1882, described auditing procedures for various accounts; significantly, those procedures included gathering evidence from outside the books. In 1905 and again 1909, Montgomery published American editions of Dislsee's Auditing, and in 1912, recognizing the departurer of U.S. practice ' from the British, he wrote the first American auditing book, Auditing: Theory and Practice, subsequently to be retitled Montgomery's Auditing.
Gradually, American audits evolved into "test audits" as procedures were adopted to rapidly expanding American business, which considered Britishstyle detailed checking of footings and postings too time-consuming and expensive. In addition to increased use of testing methods, auditors began to obtain evidence from outside clients' records as a means of examining transactions.
Because of investors' concerns, they began to pay closer attention to the valuations' concerns, they began to pay closer attention to the valuations of assets and liabilities. These developments reflected a broadening of audit objectives beyond checking clerical accuracy and detecting fraud. Independent auditing in the modern sense was emerging in the United States, motivated largely by the demands of creditors, especially banks, for reliable financial information on which, to base credit decisions.
Financial statement users in the early years of this century continued to focus on the balance sheet as the primary indicator of a company's health, and, for most part, auditors emphasized the balance sheet in their work. The first U.S. authoritative auditing pronouncement, prepared by the American Institute of Accountants (now the American Institute of Certified Public Accountants [AICPA]) at the request of the Federal Trade Commission, was published in 1917 and referred to "balance-sheet audits". A revised pamphlet was published in 1929, under the title "Verification of Financial Statements". Although the pamphlet still emphasized the balance sheet audit, it discussed income statement accounts in detail, thus reflecting the growing interest in results of operations. The 1929 pamphlet also covered reporting practices and stressed reliance on internal controls.
Types of Auditors
A popular classification of auditors uses three categories: independent, internal, and government.
Independent auditors are also referred to as external auditors and frequently as CPAs, public accountants, or "outside" auditors. Independent auditors are never owners or employees of the organization that retains them to perform an audit (their client), although they receive a fee from the client for their services. Independent auditors perform financial statement audits to meet the needs of investors and creditors and the requirements of regulatory bodies like the Securities and Exchange Commission (SEC). The audits result in a opinion on whether the financial statements are fairly stated, in all material respects, in conformity with generally accepted accounting principles. Occasionally, they perform attest engagements.
Internal auditors are employed by the enterprise they audit. The Institute of Internal Auditors has defined internal auditing as "an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization. The objective discharge of their responsibilities ... The internal auditing department is an internal part of the organization and functions under the policies established by management and the board [of directors] The primary function of internal auditors is to examine their organization's internal control structure and evaluate how adequate and effective it is. In performing that function, internal auditors often conduct performance (or operational) audits that are broadly designed to accomplish financial and compliance audit abjectives as well.
The independence of internal auditors is different from that of independent (i.e., external) auditors. Internal auditors' independence comes from their organizational status - essentially, their function and to whom they report - and their objectivity.
For external auditors, independence derives instead from the absence of any obligation to or financial interest in their client, its management, or its owners.
Government auditors are employed by agencies of federal, state, and local governments. When the audit is of the government agency or department that employs them, they function as internal auditors; when they audit recipients of government funds (including other government agencies), they act as external auditors. For example, auditors employes by the U.S. Department of Agriculture may audit the internal operations of the department; they may also audit the economy, efficiency, and program resulis of research funded by the Department of Agriculture but performed by others, such as colleges and universities. Most audits performed by government auditors are performance audits of economy, efficiency, and programs, which include determining whether the entity being audited has complied with laws and regulations concerning economy and efficiency as well as those applicable to the program. Some audits, such as those by the Internal Revenue Service, are performed almost exclusively for compliance purposes.
There are many different groups of government auditors; virtually every level of government and every government agency has its own auditors. One group in particular warrants funther discussion - the General Accounting Office (GAO) A nonpolitical agency headed by the Comptroller General of the United States, it was created by and reports directly to Congress. The GAO has the authority audit virtually avery federal agency and expenditure. The GAO formulated the notion of and standards for economy, efficiency, and program audits, which are the major part of its activities.
As suggested by the foregoing discussion, the work performed by independent, internal, and government auditors is not munually exclusive. The classification scheme used in this book is of necessity limited, and does not fully describe the three branches of the auditing profession. There is considerable overlap in the types of audits they perform, and all prossess varying degrees of independence.
Firm Structure
It is difficult to generalize about the organization of accounting firms because each one has its own structure and no two are exactly alike. Some multioffice firms are organized by groups or regions, with one partner designated overall responsibility for the practices in each group or region. The group or regional partners may report to a number of vice chairmen or other designated partners. Each practice office is headed by a partner, often called the managing pertner or partner in charge of the office, who is responsibile for day-to-day operations. Within each practice office, there may be separate units for aufiting, tax, MAS, and perhaps one or more specialized practice areas. In addition to professional personnel, each practice office may have an administrative staff to handle personnel management, including recruiting, and to support the office's accounting and reporting function.
In addition to their practice offices, many large accounting firms have a number of specialized departments, usually organized as part of a national office, that provide support to the practice. Example of such resources groups are industry specialization, marketing and planning, professional education, and accounting and auditing policy setting, research, and consulting. Firms that practice in different countries are further organized under an international structure usually governed by a committee of representatives from the various member firms or geographic areas.
The Audit Engagement Team. Each audit is staffed by a team headed by a partner who signs the audit report and is ultimately responsible for the audit and its results. Especially on large or complex engagements, there may be more than one partner, or the partner may delegate many functions to one or more managers; however, one partner retains responsibility for the quality of the audit and thus should be actively involved in its planning and in evaluating the results, as documented and summarized by the members of the engagement team. The team usually includes a manager (or more than one on a large engagement) and other personnel with varying degrees of experience and professional expertise and competence. Firms establish staff classifications through which employees progress and policies that set forth the responsibilities 6f audit personnel on each level. While these responsibilities vary from one firm to another, the typical functions and duties of each classification can be described generally.
Partner. The partner has primary responsibility for accounting and auditing services and is usually the direct contact with the client. The partner is responsible for all decisions made in the course of the engagement, including those about the scope of services, the audit strategy, and the resolution of significant accounting and auditing technical issues. In short, the partner is responsible for ensuring that the audit has been planned, conducted, and reported on in accordance with the firm's polit\cies and professional standards.
As noted firms that are members of the AICPA's SEC Practice Section are required to assing a second, or concurring, partner on SEC engagements to provide additional assurance that those objectives are achieved. Because of the perceived benefits of such additional partner review, many firms assign a concurring partner to other engagements as well.
The concurring partner on an engagement generally assesses the audit strategy, including procedures to be performed in sensitive or highrisk areas, and may suggest additional matters to be addressed or recommend ways of enhancing audit efficiency. The concurring partner reviews the draft audit report, related financial information and disclosures, and, where applicable, published reports and filings to be made with the SEC and other regulatory bodies. In some circumstances, the concurring partner's review may be more detailed and include inquiring of members of the engagement team and reviewing working papers to deteatjrnine that the scope of auditing procedures and related documentation comply with the firm's policies and professional standards.
Manager. Under the direction of a partner, a manager is responsible for administering all aspects of an engagement, including planning and coordinating activities with client personnel, delegating duties to team members, coaching them, supervising and reviewing their work, controlling engagement time and expenses, and overseeing billings and collections. A manager is expected to have attained a degree of technical competence in accounting and auditing sufficient to ensure that an audit complies with all applicable professional standards and firm policies. The manager is also responsible for keeping the partner informed of all significant developments throughout the audit. Among other things, the manager is other delegated the responsibility for reviewing the report to management covering control structure related matters, the financial statements first in draft from and then in final form, the documentation of the engagement, and proposed changes in the audit program.
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