External Audit Essay

The Role of External Audit

There are two main types of audit widely used in modern corporations – internal and external audit. The main goal is the same – to express the opinion on the company’s activities and performance data, but the final results may differ depending on the personal and professional characteristics of the auditor.

The internal auditors which work for the company are very likely to produce favourable assessments as they are not willing to disappoint their management or even try to exaggerate the company’s success. Besides these facts, internal auditors often make misstatements and errors that make their conclusions unreliable and inadequate. That is why it is very important for a company to find an independent external auditor that will perform an audit of the company’s financial statements and present an unbiased and relevant evaluation of the company’s activities, processes and assets.

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The external auditors nowadays provide not only audit services, but also a wide range of other services, which include reviews of the company’s financial statements and compilation. The main task of the first one is to check the general ledger and make all necessary inquiries of management. Compilation is used to make sure that the company’s financial statements are true, fair and free of various errors and mistaken conclusions. The external audit helps to discover the real company’s market and financial position and gives the ground for further managerial decisions. This type of audit is obligatory for public companies that sell their shares on the stock exchange and must be fulfilled early or even quarterly.

The independence of external auditors is crucial in their activity. There are strict laws in Europe and the United States that prohibit the auditor from owning a stake in public clients and severely limit the types of non-audit services they can provide. The external auditors do not specialize on finding the tracks of different fraudulent activities, but if they find the information about such operations in the process of auditing, they prepare a special report for the management, which presents further details on the case and give recommendations how to avoid such situations in future. External audit is often used to find the weak points of the organization and its financial activities and helps to prevent dangerous crisis situations.

In the United States, certified public accountants are the only authorized non-governmental type of external auditors who may perform audits and attestations on an entity's financial statements and provide reports on such audits for public review. In the UK, Canada and other Commonwealth nations Chartered Accountants and Certified General Accountants have served this role.

The role of external audit is very important as it gives the company a fresh and independent look on its activities and performance and helps to find and eliminate various errors and misstatements, omitted by internal auditors that are often less qualified and dependant on the manager’s opinion. Of course, the price of the external auditor’s services is very high, but if a company wants to have a reliable data base for making the decisions, it should definitely turn to an auditing company.

Kyoto Protocol Essay

The Kyoto protocol is the additional document of the UN’s climate changing convention. 159 states have signed it in Kyoto (Japan), in 1997.

It came into effect in 2005 and was ratified by these countries which give 55% of all worlds’ emission. The countries arranged the necessity of the emission reduction which can lead to the global warming. This document provides that during the period from 2008 till 2012 all carbon dioxide and methane emission must be reduced by 5.2%. Each country gets definite quota for emission. If some country doesn’t use all limits it can sell quota for another country. According to the UN experts’ opinion such mechanism should help the developing countries to receipt additional money for industry development. The Kyoto Protocol has caused a lot of disputes in the scientists’ circles. The main reason of such disputes was the great number of advantages and limitations of this document.

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The most significant disadvantages of the protocol are:

1. The absence of any obligations between the hugest issuers of the greenhouse gases. All the countries which have signed the Kyoto protocol in 2005 emit less than 30% of all emissions. The USA, China and India - three largest producers in the world, haven’t taken any obligations yet. Without them the Kyoto protocol in the existent form can’t seriously influence on ecology.

2. The Kyoto protocol allows transferring unused and unsold quotas to the next periods of the protocol effect. The problem is in the quotes surplus which has formed because of the economic recession. For example, in the former USSR countries the emissions have reduced twice in comparison with 1990. Most of the European countries are against quotes transferring.

The other problem is that the poorest countries which are not guilty in any ecological problems will suffer more than anyone. The conditions of life are bad in these countries and with climate changes they will become terrible. Such countries need a lot of financial and technological support from international organizations to prevent any ecological changes and to adapt to them. But here they face with the problem of decision making. The mechanisms of the associate collaboration and development were exposed to criticism many times because of the excessive bureaucracy and other procedural problems. According to information published by the World Bank from project developing to emission reduction three years pass.

Despite of such limitations the Kyoto protocol has many advantages too. The first and the main of them is the positive effect on the ecological situation on Earth. The scientists agreed that the reduction of the gas emissions has already made an impact on the general ecological situation. The developed countries which produce nearly 3/4 of all emissions were obligated to do everything to lower this volume. At the same time many developing countries have enough time and cost to implement necessary technologies. The adoption of the Kyoto protocol will not only improve the ecological situation on Earth but also speed up the development of the new technological processes. Since its confirmation many huge manufactures have successfully implemented...

Essay on Accounting Standards

The governments all over the world are now introducing new strict rules to make the companies more accountable, but the government bureaucrats are still playing their own rules and are far from being honest and precise. There is one set of accounting standards for business and a completely different one for the governments.

According to the USA Today reports, the American Government deficit would be many times larger if it employed the kind of accounting that applies to companies and business. Pentagon also has great problems in tracking the numbers and shows absolutely unrealistic statistic data. Another country where the government is using its own standards and rules is Australia.

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The companies and ordinary people in Australia are very dissatisfied with the fact that their government uses the accounting standards that differ from those applied to business. They require taking measures in order to make the public sector more accountable and solve the main problems with the figures tracking. Many of the economists claim that the government departments usually have no idea of the quantity and the location of the equipment they own. These departments are to follow international accounting rules with special carve-outs in certain clauses that are supposed to apply to the public sector. But the accounting experts state that many of those carve-outs are no longer relevant in our modern world and make the accounting process in the public sector more complicated. I’ve found a very interesting example that shows the typical problems of the governmental accounting. The Australian newspapers have recently reported that the defense bureaucrats have been asked about how they can classify an account for missiles. One missile costs more than $500 000, but missiles often appear in the books as property or inventory. There are also strong concerns about how the Australian government deals with various heritage objects and all this leads us to one conclusion – the accounting standards for business and governments should be the same and rely on the market reality.

It is obvious, that the governments are using their own accounting standards to present the favorable facts and figures and give the statistic data that will help to create an attractive country’s image. But it is also obvious to me that the public should be given the truth and the facts should be fair and precise. If the governments are made more accountable, they will be more careful in their actions and policy measures and the public will have more control over the country’s assets and property.