Auditing

Auditing is an accounting function that involves the review and evaluation of financial records and financial position of a company. Audits are performed by highly qualified accountants (auditors) ordered by the management of the company or by some state authorities (revision and control). Not so many years ago audits suggested that a company had financial difficulties or some irregularities in the records. At present audit is a normal and regular part of business practice.

There are two types of auditing: internal and independent.

Internal audit is a system of internal control against errors and misappropriations. Many companies employ their own accountants to maintain an internal audit. They continuously review operating procedures and financial records and report to management on the current state of the company’s fiscal affairs. They check the accounting records in regard to completeness and accuracy, making sure that all irregularities are corrected.

Independent auditing is done by certified accountants who are not employees of the organization whose books they examine. Independent auditors review the business’ operating activities; they examine financial statements, the accounting records and other business papers to determine the accuracy and completeness of the records. It is called fairness in the accounting terminology.

The accountant’s judgment or opinion on the fairness of the records is written in a document sent to the client upon completion of the audit. It consists of a letter addressed to the client that includes a scope paragraph (list of documents that he has examined and the standards that have been used for the audit), and the opinion paragraph (the auditor’s conclusions).

Auditors can help the business to set up a reliable accounting system; they can also discover whether non-existent transactions have been entered into the books. Even in a small business mistakes in the books of accounts can lead to a business failure.

Audit and control is a controlling function of some state authorities (e.g. State Treasury, Control and Revision Administration) that involves the review and evaluation of financial records and financial position of the business, as well as managerial skills of the management and financial health of the organization.

Exercise 3. Answer the following questions:

1. What function is auditing?

2. What operations does auditing involve?

3. Who performs auditing?

4. Who orders audits?

5. Are audits a normal and regular part of business practice today?

6. What types of auditing do you know?

7. Who performs internal auditing and with what aim?

8. Who performs independent auditing?

9. What documents do independent auditors examine?

10. What is called “fairness” in the accounting terminology?

11. What does the final product of auditing include?

12. How can auditor help a business?

13. What state authorities can order audit and control?

14. What is evaluated in the course of such a control?

Exercise 4. Translate into English.

фінансовий стан компанії; на замовлення керівництва; нещодавно; нормальна і звичайна практика; постійно; поточний стан; впевнитись; в термінології бух. обліку; достовірність; лист, адресований клієнту; привести до занепаду бізнесу.

Exercise 5. Translate into Ukrainian.

highly qualified accountants; financial difficulties; internal control; business’ operating activities; upon completion of the audit; to set up a reliable system; to enter a non-existent transaction into the book; managerial skills; business’ financial health; opinion on the fairness of the records.

Exercise 6. Match and learn the synonyms.

A: evaluation, error, accuracy, fiscal, management, revision;

B: financial, auditing, authority, mistake, judgment, fairness.

Exercise 7. Match and learn the opposites.

A: regularity, existent, appropriation, internal, complete, reliable;

B: misappropriation, incomplete, unreliable, irregularity, non-existent, external.

Write out prefixes that form the opposite meaning. Use your dictionary to provide 2 more examples of each case.

Exercise 8. On the basis of the text define the following terms:

audit, internal audit, independent audit, auditor

Exercise 9. Complete the sentences using the proper words from the list below:

in regard to, current state, irregularities, completeness, to perform, standards, reliable, managerial skills

1. Have you mentioned the … used for the audit? 2. He received the highest mark for the … of his answer. 3. Which of your personnel will you employ … the audit? 4. She discovered some … in the accounting records. 5. Failure of this company was due to poor… of its management. 6. We have sent you the documents … the audit completed last month. 7. You can trust him. He is the most … person I have ever met. 8. We have just received the report on the … of our fiscal affairs.

Exercise 10. Translate into English.

1. Аудитор зробить висновки після того, як аудит буде завершеною

2. Фінансова діяльність фірми буде перевірена до кінця березня.

3. Компанія стане прибутковою після того, як буде організована надійна система бух.обліку. 4. Аудитор встановлює, чи було зроблено помилку у записах. 5. Керівництво було задоволено тим, що всі помилки були виправлені.

Grammar point:

The Future Perfect tense: Active and Passive form (p.145)

The Future Perfect Continuous tense (p.146)

* We use Future Perfect Active or Passive to say that an actionwill have been completed by a definite time in the future.

e.g. The auditor will have completed the audit by the end of May.

The audit will have been completed by the end of May.

Exercise 11. Use the verb in brackets in either Future Perfect Active or Passive:

1. I (do) it by that time. 2. Everything (do) by that time. 3. He (write) a letter by 7 o’clock tomorrow. 4. The book (write) by next month. 5. By tomorrow’s evening the report (complete). 6. He (pass) the exam by this time. 7. The auditors promise they (to finish) examining the documents by next Friday. 8. He hopes the results (to review) by our next meeting.

9. All the books (to check) by his arrival. 10. The equipment (to maintain) by the time you come back.

Exercise 12. Use the verb in brackets in the Future Perfect Continuous form; translate the sentences as it is shown in the model.

Model: I (to work) in this company for three years next April. –

I‘ll have been working in this company for three years next April.

Наступного квітня буде три роки як я працюю в цій компанії.

1. We (to run) our family business for 20 years next spring. 2. She (to review) their financial documents for a month next Monday. 3. I (to teach) economics for 10 years this summer. 4. They (to check) the accounting records for a week this Friday. 5. Our accounting firm (to perform) independent audit for 15 years this autumn.

* Compare the use of Future Simple, Future Continuous and Future Perfect. Note the time expressions:

He will write this report tomorrow.

He will be writing this report at 10 tomorrow.

He will have written this report by 10 tomorrow.

Exercise 13. Translate into English.

1.О п’ятій він буде працювати над фінансовим звітом. 2. Він завершить фінансовий звіт за два дні. 3. Він завершить фінансовий звіт до завтра. 4. Чи складе вона іспит до червня? 5. Чи буде вона складати іспит у червні? 6. Чи складатиме вона іспит завтра о десятій? 7. Вони не приїдуть завтра. 8. Вони не приїдуть до завтра.

Exercise 14. Use different means of expressing future action.

1. This hotel is fully booked. I think I (to ring) the Hilton Hotel and see if they have any rooms. 2. Who (to give) the presentation at tomorrow’s meeting? 3. I’m sorry. I have to go now. I (to call) you back in ten minutes. 4. We (to send) you our conclusions after we (to complete) the examination of your financial records. 5. They (to perform) internal audit to make sure there are no misappropriations. 6. He (to go) to start a new business in two months. 7. She (to graduate) from the college this time next year. 8. Our accountants (to prepare) Income Statement this time tomorrow. 9. Your results (to be) more reliable if you (to follow) this procedure. 10. We (to plan) to borrow some money from the bank as we (to consider) expanding.

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