Філологічні науки

Діордіященко О.В., Вівіч А.М.

Первомайський факультет Харківського державного університету харчування і торгівлі

PERFORMING AN AUDIT

Auditing is a process in which an independent accountant-auditor examines a firm's accounting records and financial statements and offers an opinion on their accuracy and reliability. There are different types of audits, for example, financial statements audits, income tax audits, "value for money" audits, environmental audits, administrative audits, financial management audits, etc.

The accountancy profession has built up a significant amount of expertise in performing financial statements audits. Accounts audits were established as an instrument to protect third parties, the users of accounts, since the auditor's opinion helps establish credibility of financial statements. Special bodies of users, such as supervisory boards, employee representatives, government agencies may sometimes need an in-depth audit report, which is usually confidential.

It should be stressed that auditors do not monitor, they offer an opinion, and the audit process and audit procedures are complicated and manifold. The auditor's opinion is gradually being built up from a mass of detailed work to the final judgment through the planning and testing stages. The auditor normally starts with a study of the business environment the audited company is working in and performs a preliminary analytical review.

Then he should direct his attention to the financial statements. Interestingly enough, however, the auditor's attention is not directed towards the financial statements' elements as such, but towards the correctness of various assumptions made by the management for their preparation. For instance, the auditor needs to know if figures are complete and accurate and reflect what they should reflect, if income and expenses are recorded in the proper periods and if the legs position is reflected adequately.

The auditor should focus on any misstatement whether it is intentional or unintentional. The management is responsible for the reliability of financial information. If the management is not prepared to take the responsibility it may be hard to complete the audit. In such situations the auditor should seek his own evidence by means o independent audit procedures.

Although the financial statements are the ultimate objectives of an audit, normally such audits cannot be completed without a proper study and evaluation of the accounting system and assessment of the internal accounting controls.

Defining the audit strategy the auditor has to decide whether to rely on internal controls or to resort to substantive testing applying analytical review procedures, such as tests in totals, comparison with budgets or even statistical analysis of figures.

In the planning stage as well as during the performance of audit
procedures and, finally, in forming conclusions, "materiality" and
"audit risk" are critical elements in the auditor's judgment.
"Materiality" refers to the magnitude or nature of a misstatement
(including an omission) of financial information.

"Audit risk" (including three different components - inherent risk, control risk, detection risk) is the risk that an auditor may give an inappropriate opinion on financial information that is materially misstated.

The natural finalization of the audit process is the auditor's report, reflecting the auditor's opinion on the financial statements. Unfortunately, audits do not always end up in an approval of the financial statements. Any deviation from the unqualified opinion should be explained in the auditor's report, including the uncertainty or the disagreement that caused the auditor to qualify his opinion.

In order to protect the public interests and the profession's integrity an individual must be sufficiently educated and adequately trained before being certified to act as an auditor.

Audit is an examination of the records and reports of an enterprise by accounting specialists other than those responsible for their preparation. Public auditing by independent accountants has acquired professional status and become increasingly common with the rise of large business units and the separation of ownership from control. The public accountant performs tests to determine whether the management's statements were prepared in accordance with acceptable accounting principles and fairly present the firm's financial position and operating results. Such independent evaluations of management reports are of interest to actual and prospective shareholders, bankers, suppliers, lessors, and government agencies. Generally speaking, auditing has two functions: to reveal undesirable practices and, as far as possible, to prevent their recurring in the future. A relatively new type of auditing is internal auditing. It is designed to evaluate the effectiveness of a business's accounting system. Perhaps the most familiar type of auditing is the administrative audit, or pre-audit, in which individual vouchers, invoices or other documents are investigated for accuracy and proper authorization before they are paid or entered in the books.

In English-speaking countries, public auditors are usually certified, and high standards of professional qualification are encouraged. Most countries have specific agencies or departments charged with the auditing of their public accounts. Taxpayers in all countries are interested in the sound management of the collected revenue; they also want to know whether or not the executive branch of government is complying with the law, especially in the area of public finance.

Government auditors are working for sound, economical and efficient financial management, addressing the key problems in the field of public sector auditing, like strengthening the institutions that oversee financial management, changes in the scope and methodology of government auditing, ability to conduct performance audits in public enterprises, strengthening internal auditing in spending units, ex-post external audits of government activities, budget efficiency problems, performance of expenditure programmes.

The advantages accruing from an audit are obvious, taking into account the complexity of present-day commerce and business.