To emphasize:
What auditors do is to ensure that there is no material misstatement in the financial statement. Auditors are not confirming that the financial statement is accurate.
No material misstatement vs Accurate
The key word " No material misstate" allowed a certain level of tolerable error in the financial statements. (i.e. a certain level amount of acceptable errors, which are not going to affect financial statements users' decision-making)
The key word " accurate" required one to ensure that the financial statements are 100% or 99% correct. Higher level of responsibility and associated risk would be exposed by the auditors, if they are using the word, " accurate".
Friday, June 29, 2007
#15- Can auditors draft Financial Statements for client?
Can auditors draft (i.e. prepare) the financial statements for clients ?
The answer is No.
As mentioned in post #10, the nature & the responsibility of an auditor is to check, to scrutinize the financial statement prepared by the clients is not materially misstated. Auditors are the investigators.
Self-review threat to auditors' independency would be created if auditors are checking on what the auditors themselves are preparing. Auditors are supposingly to exercise its professional due care ( in ensuring integrity) & competence to ensure the accuracy of the Financial Statements.
The answer is No.
As mentioned in post #10, the nature & the responsibility of an auditor is to check, to scrutinize the financial statement prepared by the clients is not materially misstated. Auditors are the investigators.
Self-review threat to auditors' independency would be created if auditors are checking on what the auditors themselves are preparing. Auditors are supposingly to exercise its professional due care ( in ensuring integrity) & competence to ensure the accuracy of the Financial Statements.
#Joke-Accountants don't read novels
Why do accountants make good lovers?
They're great with figures.
Why accountants don't read novels?
Because the only numbers in them are page numbers.
They're great with figures.
Why accountants don't read novels?
Because the only numbers in them are page numbers.
Monday, June 25, 2007
#14 Foreign Currency Translation Reserve
In this thread, let's look at the accounting for unrealized exchange differences.
Assuming, XYZ Co. ( a China based company) hold 100 US$ balance on hand ( and assuming foreign exchange rate is: 1 USD= 1.5 RMB)... In XYZ Co. the Cash account balance at this time would be:
US$ denominated cash = RMB 150
One month later, China's currency has appreciated to 1USD= 1.2 RMB, the XYZ Co. have to make the following adjustments:
Dr. Unrealized exchange difference loss 30
Cr. Cash 30
<>
The term unrealized is used in this case is because there wasn't any transactions took place, it's merely a mark-to market exchange rate practice. Hence, we called it unrealized forex losses.
Assuming, XYZ Co. ( a China based company) hold 100 US$ balance on hand ( and assuming foreign exchange rate is: 1 USD= 1.5 RMB)... In XYZ Co. the Cash account balance at this time would be:
US$ denominated cash = RMB 150
One month later, China's currency has appreciated to 1USD= 1.2 RMB, the XYZ Co. have to make the following adjustments:
Dr. Unrealized exchange difference loss 30
Cr. Cash 30
<>
The term unrealized is used in this case is because there wasn't any transactions took place, it's merely a mark-to market exchange rate practice. Hence, we called it unrealized forex losses.
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