ETHICAL BEHAVIOUR OF ACCOUNTANTS
Several accounting organizations have formulated codes of ethics that govern the behaviour of their members. «Code of Professional Conduct» adopted by the American Institute of Certified Public Accountants reads:
«Membership in the American Institute of Certified Public Accountants is voluntary. By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations...»
...In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.
...Members should accept the obligation to act in a way that will serve the public interest, honour the public trust, and demonstrate commitment to professionalism.
...A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.
...To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
...A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.»
Some business firms have also developed codes of ethics for their employees to follow. But there is something more than merely making sure you are not violating a code of ethics. Most of us sense what is right and wrong. An accountant’s most valuable asset is his or her reputation.
Auditing
What do you know about auditing?
How can we translate the word into Russian?
What is auditor’s job supposed to be?
The answers to these questions can be found in the following texts.
T E X T 12
AUDITING
Auditing is the process by which a competent, independent person accumulates and evaluates evidence about qualifiable information related to a specific economic entity for the purpose of determining and reporting on the degree of correspondence between the quantifiable information and established criteria. This definition includes several key words and phrases. Let’s discuss each of them.
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Qualifiable information and established criteria. To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. Quantifiable information can and does take many forms. It is possible to audit such things as a company’s financial statements, the amount of time it takes an employee to complete an assigned task, the detail cost of a contract, and individual tax return. The criteria for evaluating qualitative information can also vary considerably. For example, in auditing a vendor’s invoice for the acquisition of raw materials, it is possible to determine whether materials of the quantity and stated description were actually received, whether the proper raw material was delivered considering the production needs of the company, or whether the price charged for the goods was reasonable.
Economic entity is a legal entity, such as a corporation, unit of government, partnership, etc. Whenever an audit is conducted, the scope of the auditor’s responsibilities must be made clear. The primary method involves defining the economic entity and the time period, the last typically being one year, but may be for a month, a quarter, several years, and even the life time of entity.
Accumulating and evaluating evidence. Evidence is defined as any information used by the auditor to determine whether the quantifiable information being audited is stated in accordance with the established criteria. Evidence takes many different forms, including oral testimony of the auditee (client), written communication with outsiders, and observations by the auditor. It is important to obtain a sufficient quality and volume of evidence to satisfy the audit objectives.
Competent, independent person. The auditor must be qualified to understand the criteria used and competent to know the types and amount of evidence to accumulate to reach the proper conclusion after the evidence has been examined. The auditor must also have an independent mental attitude. Independence cannot be absolute by any means, but it must be a goal that is worked toward and it can be achieved to a certain degree. Even though an auditor is paid by a company, he or she may still be sufficiently independent to conduct audits that can be required and can be relied upon by users.
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Reporting is the communication of the findings to users. The final stage in the audit process is the audit report. Reports differ in nature, but in all cases they must inform readers of the degree of correspondence between quantifiable information and established criteria. Reports also differ in form and can vary from the highly technical type usually associated with financial statements to a simple oral report in the case of an audit conducted for a particular individual.
Very often the general public confuses auditing with accounting. It happens due to the fact that most auditing is concerned with accounting information, and many auditors have considerable expertise in accounting matters. Auditing is the process of recording, classifying and summarizing economic events in a logical manner for the purpose of providing financial information for decision making. The function of accounting is to provide certain types of quantitative information that management and others can use to make decisions. In addition, accountants must develop a system to make sure that the entity’s economic events are properly recorded on a timely basis and at a reasonable cost.
In auditing accounting data, the concern is with determining whether recorded information properly reflects the economic events that occurred during the accounting period. Since the accounting rules are the criteria for evaluating whether the accounting information is properly recorded, any auditor involved with these data must also thoroughly understand rules. In addition to understanding accounting, the auditor must also possess expertise in the accumulation and interpretation of audit evidence. Determining the proper audit procedures, sample size, particular items to examine, timing of the tests, and evaluating the results are problems unique to the auditor.
T E X T 13
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TYPES OF AUDIT
Three types of audit are the main ones: operational audits, compliance audits, and audits of financial statements.
Operational audits is a review of any part of an organization’s operating procedure and methods for the purpose of evaluating efficiency and effectiveness. At the completion of an operational audit, recommendations to management for improving operations are normally expected. In operational auditing, the reviews are not limited to accounting. They can include the evaluation of organization structure, computer operation, production methods, marketing, and any other area in which the auditor is qualified. In this sense, operational auditing is more similar to management consulting then to what is generally required as auditing.
Compliance audits. The purpose of the compliance audits is to determine whether the auditee is following specific procedures or rules set down by some higher authority. A compliance auditing could include determining whether accounting personnel are following prescribed procedures, reviewing wage rates for compliance with minimum laws, or examining contractual agreements with bankers and other lenders, etc.
Audits of financial statements. This type of auditing is conducted to determine whether the overall financial statements are stated in accordance with specific criteria. The assumption underlying an audit of financial statements is that they will be used by different groups for different purposes. Normally, the criteria are generally accepted accounting principles.
1.What is auditing?
2.What is the difference between auditing and accounting?
3.Speak about each ‘component’ of the definition of auditing.
4.What types of auditing have you read about?
Ex.9. Make up the sentences. Put them down into your notebooks. The first word is given to you.
1. Assets, enterprises, and, plant, property, financial, and, include, in, investments, equipment, subsidiaries, leases, other. 2. Assets, transactions, from, non-cash, arise, may, past, be, events, which, cash, or. 3. Liabilities, obligations, include, financial, long-term, similar, loans, and, debentures, and, plans, payables, short-term, pension, overdrafts, and, bank, loans. 4. Equity, enterprise, of, is, the, residual, reporting, a, assets, arising, the, from, deduction, the, from, liabilities, of. 5. Revenues, enterprise, are, the, inflows, of, enhancement, activities, of, normal, assets, that, the, arise, of, in, course, the. 6. Expenses, activities, are, outflows, normal, or, enterprise’s, depletions, the, of, , course, in, the, that, assets, arise, of.
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Ex. 10. Insert prepositions.
1. Accountants frequently refer … a business organization as an accounting entity.
2. Business activities are limited … transactions.
3. First of all the firm must enter … a legal contract … the acquisition of means of production.
4. It means an obligation to pay money … a later date.
5. Transaction … the firm occur between the various departments.
6. The input factors are transferred … goods and services.
7. Usually it is done … a yearly basis.
8. Accounting is concerned … providing information … managers.
9. Transactions lead … an outflow of money.
10. Accountants provide most of the information needed by external users of financial accounting.
11. Financial statements are formal reports providing information … a business’ financial position.
12. The external users rely … relevant & reliable financial statements.
13. They provide detailed explanations … why actual costs varied … cost estimated.
14. They must decide … how much merchandise inventory to keep … hand.
15. The general public is interested … the amount of income that business earn.
16. They include depreciations … factory buildings and equipment.
Ex. 11. Translate the following sentences. Pay special attention to the word charge. Give your own sentences using as many meanings of the word as you can.
1. Please charge the bill to my account.
2. The bank charges me 25 % interest on the loan.
3. They are happy to give their services free of charge.
4. He denied the crimes with which he was charged.
5. She was in charge of several young people.
6. It requires electricity to charge up its batteries.
7. I have no option but to charge you strictly to say nothing about it.
8. He has been in charge of department for 10 years.
9. For any organization it is important who is charged with directing and controlling its operations.
10. They charged us one thousand dollars for it.
Ех. 12. Speak on the following.
Ex. 13. Work
Ex.13. Work with synonyms. Differentiate between
1. buy – purchase
2. expenses – expenditures – costs
3. income – revenue
4. profit – return
5. rent – hire – lease
Ex. 14. Translate the following text in written form.
Bookkeeping
Bookkeeping is writing down all the transactions arising from business activities which can be expressed in money. To run your business well you must know what money you have received, how much money you have spent and, most important of all, how you spent it A bookkeeping system can provide you with that information. The books used for keeping records consist of a ledger and subsidiary books.
The ledger is the general book in which you enter almost all the figures arising from your business activities. A ledger consists of a number of accounts. A chart of accounts serves as an index to the ledger, and each account is numbered to facilitate the frequent refernces that are made to it.. An account is a column in the ledger that has been given a specific name, e.g. Cash, Bank, Sales and etc.
The invoice book helps you to remember who owes the business money for goods and services you have sold but have not been paid for. When you have delivered a commodity or provided a service you send an invoice to the customer. You keep a copy of the invoice in the invoice book.
The purchase journal is used to write down details of goods and services bought on credit which are not yet paid for. The invoice you receive from the supplier is kept in the purchase journal until it is fully paid.
The wages book. In this book you make notes about your employee anmes, wages, advance payments and so on.
Ex. 15. In turns, explain the meaning of the economic terms given below to your partner.
Accounting, cost, income, liabilities, transaction, cost accounting, assets, balance sheet, debit, credit, invisible assets, account, double-entry, expenses, direct costs, cash, ledger, invoice book, revenue, owner’s equity, profit & loss account, scheduled payments, inventory.
Ex. 16. Form nine complete sentences by combining sentence parts from (A), (B) and (C).
A
1. a business organization
2. whenever the firm
3. Decreases result from
4. the owner’s claim to
5. The account title
6. individuals and business
7. Some business firms
8. the opening cycle is treated
9. increases and decreases in the firm
B
1. Accountants frequently refer to
2. In financial accounting
3. for which the account was established
4. Local, state and federal governments
5. enters into a legal contract
6. withdrawals by the owner and
7. have also developed codes of ethics
8. the assets of the business
9. should be logical to help
C
1. A transaction occurs
2. Every account format must provide for
3. as an accounting entity
4. from a net loss for the period
5. the accountant group similar transaction into the same account
6. levy taxes on
7. for their employees to follow
8. as a period of one year
9. This account shows
Ex. 17. Translate the definitions into English and match them with the words given below.
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