Independent Auditor’s Report to the Board of Directors and Stock-holders of ________________________ Company

We have audited the consolidated balance sheets of _________________ Company and Subsidiaries at December 31, … and … (years) and the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the period ended December 31, … (year).

Respective _______________ of directors and auditors are as follows: the company directors are responsible for the preparation of financial _______________; our responsibility is to form an independent __________________based on our audit of these statements and to report our opinion to you.

Basis of opinion. We conducted our _______________ in accordance with generally accepted auditing __________________ . Our audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the ______________ in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed.

We planned and ___________ our audit so as to obtain all the information and explanations which we considered ____________________ in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are _________________ from material misstatements, whether caused by fraud other irregularity or error. In ______________ our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our _______________ provides a reasonable basis for our opinion.

Opinion. In our ______________ the financial statements referred to above give a true and fair _______________ of the consolidated financial position of _______________ Company and Subsidiaries at December 31, … (year) and have been properly prepared in _______________with generally accepted accounting principles and the Company Act 1985.

Vocabulary

Consolidated объединенный

Equity справедливость, беспристрастность

Disclosure отражение (информации о финансовой отчетности)

Appropriate свойственный, присущий

Consistently последовательно, постоянно

Fraud обман, мошенничество

Exercise 11. Read the dialogue, using the vocabulary, given after it. Sum up its content and act it out:

Foreigner: As far as I know, when you started your economic reforms some people believed that under market conditions the controlling function of the state would be losing its importance. Has this idea proved to be true?

Russian: It’s clear now that the idea was erroneous. Results of audits and inspections reveal lots of breaches of the law, misuses of public money, misappropriations and numerous cases of budget funds squandering.

F.: How can you account for so numerous financial infringements in Russia now?

R.: The situation we are having now is a consequence of a weak legal base, shortcomings in running the country’s finances, absence of a legal base for an active financial control.

F.: What infringements are most frequent?

R.: Well, first of all, I would single out diverting of money away from the stated purposes into lucrative deals for personal gain. I mean funds allocated as returnable resources and budget resources allocated as the state support for different branches of economy. Then I would mention transfer of state funds to commercial units, embezzlements, defalcations, and misappropriation of funds.

F.: We have heard about scandals in your country when managers illegally placed so-called “free money” in commercial banks and used the profit made to satisfy their own needs, like buying cars and real estate, going abroad on holiday and so on.

R.: That’s true. In some cases, managers underreport their taxable profit, do not disclose income in accounting documents, start business operations without licenses, avoid paying excise duties, etc. There is no legally established responsibility for the misuse of budget funds, which causes irresponsibility, wastefulness, and criminal actions on the part of senior officials and managers. Do you have similar problems?

F.: Well, yes, we have, but on a smaller scale. There is an efficient system of government auditing in our country. We examine accounting and performance of all government agencies and public corporations. What are the functions of government auditing in Russia?

R.: Generally, we focus on compliance of government agencies, juridical persons with financial legislation of the Russian Federation, we audit execution of the federal budget and extra-budget funds, control money circulation, use of credit resources, external and internal state debt, state reserves, safe keeping and use of state property. We are also responsible for many other things.

F.: What measures do you take when you detect financial misdeeds? Do you hand your reports to investigation authorities?

R.: Yes, we do. Investigating authorities institute proceedings on the basis of our reports. We must work to improve the system of financial control in Russia because it does not fully meet the present-day requirements.

F.: You mean the vigorous emergence of the private sector?

R.: Yes, the development of market relations and public and private finances.