UNIVERSITATEA DANUBIUS DIN GALAI CURSURI UNIVERSITARE DE MASTERAT DOMENIUL: CONTABILITATE SPECIALIZAREA: AUDIT I CONTROL PUBLIC I PRIVAT FACULTATEA

DE TIINE ECONOMICE

COMUNICARE N AUDIT N LIMBA ENGLEZ AUDIT COMMUNICATION IN ENGLISH

Liviu-Mihail Marinescu

2011

CONTENTS:

1. Basic constituents of communication in financial audit operations

2. The written communication in financial audit activities 3. The International Audit Standards (IAS) 4. Financial audit terminology and specialised translations 5. The ESP (English for Special Purposes) for audit activities 6. The essential structure of a written audit communication between performer and

beneficiary to obtain efficient audit evidence

7. The essential structure of an oral presentation in audit activities 8. The essential structure of a written report in audit activities 9. The negotiation of audit performance the commercial contract

10. Essential English abilities for audit training courses 11. International participation of Communication Romanian auditors in EU states Specific

12. Using Specific Linguistic Instruments for Translating Audit Documents

13. Studying Audit Specific Literature with Proper Linguistic Tools 14. Forecasting the future structure of communication in audit operations

1. BASIC CONSTITUENTS OF COMMUNICATION IN FINANCIAL AUDIT OPERATIONS 1.1. IMPORTANCE OF EFFECTIVE FINANCIAL AUDIT OPERATIONS COMMUNICATION IN

Effective communication is important in business dealing with employees and outsiders, such as vendors and clients. Because accounting is an intrinsic part of any business, good communication skills are vital in this area. Important financial tasks such as budget preparation and reporting, bill paying, payroll and recording income need to be presented properly to management and others to be useful and meaningful. The most important use of accounting data is to communicate meaningful information, allowing management to make good decisions. To be effective, accounting information must make sense and be understood.; or else, it is just a list of numbers with no real significance. Many businesses use templates for internal reports to communicate information in a matter that is familiar and easy to use by management. For example, departments may get "actual versus budget" reports every month, using the same format, facilitating understanding and analysis. Another important user of accounting information is the investor, who wants to know how a business is doing financially. Usually this type of information is communicated through standard reports, such as balance sheets and income statements, compiled using generally accepted accounting principles. A balance sheet shows assets, including cash, liabilities and owner's equity. An income statement presents income and expenses of a business at a certain point in time. Both statements are compiled the same way every month or period, allowing for comparability and analysis, from an investor's point of view. Many investors may also want to see cash flow statements with information about money coming in and going out in a business. They may also request special reporting.

Accounting information needs to be communicated properly to government entities in the case of taxes. For example, Texas requires sales and use tax on certain items and accounting information must be presented a certain way to be significant. Another example of government communication is the annual tax return with the Internal Revenue Service, where information is shown following specific rules and regulations. Communication regarding financial matters to government should be done in writing as much as possible. Talking about accounting numbers on the phone can create confusion and should be avoided as much as possible. Banks may want to be appraised of financial situation of businesses, making communication of accounting matters a priority in many firms. In case of bank loans, there may be periodic reports using accounting information. Banks are usually interested in cash flows and may require special reporting regarding a firm's liquidity, including short-term accounts receivables and payables. All this information must be communicated clearly to the bank, or the business may not get the loan. The best way to communicate any accounting information is to do it in writing and in a report format with line descriptions on the left side of the pages, columns headed by a date or description, and a report title. Accounting reports are for a specific period or date. It's rare to see an accounting report with only numbers on it and no description or dates. Make sure that any necessary schedules or backup documentation is available in case of questions. To proper communicate accounting information, reports should be organized with the most summarized version on top and others following it at the bottom, and all reports should be stapled with no pages flying around. 1.2. THE BASIC COMPONENTS OF EACH COMMUNICATION PROCESS These are five in number: Message: What you are going to say.What is the nature of your message positive or negetive.The selection of yours on the behalf of the reaction of receiver. Sender: Is the one who is sending the message likeyou if you want to say something.And I as I am messaging to you right now by writing in text.

Method: In other words "The medium the sender uses is called the methods "Like I am using Internet and computer to message you.I may use a mobile phone a letter.And a good bussinesman must consider that the medium must be economical(less expensive) Reciever: One who is receiving the message.Like you.Now you are reading the message you have received via computer & internet so you are the receiver. Feedback: What are the aftereffects of your message.How does the receiver reacts when he receives the message and it is also the assurance of delivery of your message.And also how much confident you are about your message is it authentic? 1.3. WHAT DOES BUSINESS COMMUNICATION ACTUALLY MEAN IN THE CONTEXT APPROACHED? Business communication is used to promote a product, a service, or an organization and is also a means of exchanging information to be used in performing trade activities, for instance inside a supply chain, from the manufacturer to the consumer. Business communication encompasses a variety of topics, including marketing, branding, customer relations, consumer behaviour, advertising, public relations, corporate communication, community engagement, research and measurement, reputation management, interpersonal communication, employee engagement, online communication, and event management. It is closely related to the fields of professional communication and technical communication. In business, the term communication media, Outdoor, and Word of mouth. Business Communication can also refer to internal communication. A communications director will typically manage internal communication and craft messages sent to employees. It is vital that internal communications are managed properly because a poorly crafted or managed message could foster distrust or hostility from employees. Business Communication is a common topic included in the curricula of Masters of Business Administration (MBA) programs of many universities. As well, many community colleges and universities offer degrees in Communications. encompasses various channels of communication, including the Internet, Print (Publications), Radio, Television, Ambient

There are several methods of business communication, including: -Business letter - the essential key to a good business -Web-based communication - for better and improved communication, anytime anywhere -video conferencing, which allow people in different locations to hold interactive meetings; -e-mails, which provide an instantaneous medium of written communication worldwide; -Reports - important in documenting the activities of any department; -Presentations - very popular method of communication in all types of organizations, usually involving audiovisual material, like copies of reports, or material prepared in Microsoft PowerPoint or Adobe Flash; -telephoned meetings, which allow for long distance speech; -forum boards, which allow people to instantly post information at a centralized location; -face-to-face meetings, which are personal and should be succeeded by a written follow-up. Business communication is somewhat different and unique rather from other type of communication since the purpose of business is to get profit. Thus, to make a good way for profit, the communicator should develop good communication skills. By knowing the importance of communication many organisations started training their employees in betterment of communication techniques. Essentially due to globalization, the world has become a Global village. Thus, here, the importance of cross cultural communication plays a vital role, all nations having their own meaning for each and every non-verbal and verbal actions. The way we appear speaks a lot about us in business communication. A neat appearance is half a well-done verbal communication. But developing communication is not a day work; it needs a constant yearly practice. There are several ways to get trained in excelling business communication such 1. by our own, 2. by practicing from trainers, 3. by internet contents, 4. by books.

Communication is neither the transmission of message nor the message itself. It is the mutual exchange of understanding between the sender and the receiver. Communication needs to be effective in business, and it is also the essence of management. The basic functions of management (Planning, Organizing, Staffing, Directing and Controlling) cannot be performed well without an effective communication. It also involves a constant flow of information. Feedback is an integral part of business communication. Organizations these days are pretty large, this involving quite a number of people. There are various levels of hierarchy in an organization. Greater the number of levels, the more difficult is the job of managing the organization. Communication here plays a very important role in the process of directing and controlling the people inside an organisation. Immediate feedback can be obtained and misunderstandings -if any- can be avoided. There should be effective communication between superiors and subordinated in an organization, and between the organization and society at large (for example between company management and trade unions). It is essential for the continuous success and growth of any business. Communication gaps should not occur in any organization. Business Communication is goal oriented. The rules, regulations and policies of a company have to be communicated to people within and outside the organization. Business Communication is regulated by certain rules and norms. In early times, business communication was limited to paper-work, telephone calls etc. But now with the advent of technology, we have cell phones, video conferencing, e-mails, satellite communication to support our business activities. Effective business communication helps in building goodwill of an organization. Business Communication can be of two types: Oral Communication - An oral communication can be formal or informal. Generally, business communication is a formal means of communication, like : meetings, interviews, group discussion, speeches etc. Written Communication - Written means that business communication includes an agenda, reports, manuals etc. It also refers to writing business letters, an activity

complying with certain rules which may seem too arbitrary because they are very flexible.
2. THE

WRITTEN ACTIVITIES

COMMUNICATION

IN

FINANCIAL

AUDIT

2.1.

TERMINOLOGICAL SPECIFICATION

A financial audit - or more accurately an audit of financial statements - is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is a reasonable assurance that the financial statements are the financial statements are presented fairly, in all material respects, or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. Financial audits are typically performed by firms of practising accountants who are experts in financial reporting. The financial audit is one of many assurance functions provided by accounting firms. Many organisations separately employ or hire internal auditors, who do not attest to financial reports but focus mainly on the internal controls of the organization. External auditors may choose to place limited reliance on the work of internal auditors. Internationally, the International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB) is considered as the benchmark for audit process. Almost all jurisdictions require auditors to follow the ISA or a local variation of the ISA. Financial audits exist to add credibility to the implied assertion by an organization's management that its financial statements fairly represent the organization's position and performance to the firm's stakeholders. The principal stakeholders of a company are typically its shareholders, but other parties such as tax authorities, banks, regulators, suppliers, customers and employees may also have an interest in ensuring that the financial statements are accurate. The audit is designed to increase the possibility that a material misstatement is detected by audit procedures. A misstatement is defined as false or missing information, whether caused by fraud (including deliberate

misstatement) or error. "Material" is very broadly defined as being large enough or important enough to cause stakeholders to alter their decisions. 2.2. SAMPLE OF AUDITORS LETTER TO MANAGEMENT

REPRESENTATIVES

Auditor's Letter to the Management of the Town of Harpswell, Maine

To the Management of the Town of Harpswell, Maine: In planning and performing our audit of the financial statements of the Town of Harpswell (the Town) for the year ended December 31, 2005, we considered the Towns internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control. However, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The attached schedule summarizes our comments and suggestions concerning those matters. This letter does not affect our report dated January 20, 2006, on the basic financial statements of the Town. The accompanying comments and recommendations are intended solely for the information and use of management and others within the organization and should not be used by anyone other than these specified parties. We wish to express our appreciation for the cooperation and assistance we received from the officials and employees of the Town of Harpswell during the course of our audit. We will review the status of these comments during our next audit engagement. We have already discussed them with various Town personnel, and we will be pleased to discuss them in further detail at your convenience,

to perform any additional study of these matters, or to assist you in implementing the recommendations. Sincerely, Runyon Kersteen Ouellette

2.3.

SAMPLES OF COMMERCIAL CONTRACTS

Contracts are documents that make personal and business agreements official and binding, ensuring both parties' safety in entering such an agreement. Contracts are invaluable tools that help contracting parties understand the terms agreed upon and mutual individual obligations. Although all contracts may - in fact should - vary in order to accurately reflect the intent of the parties in particular circumstances, the following sales contracts are samples of what such documents may look like. They are intended to be mere starting points and guides to help you create contracts in English, that includeall of the terms relevant to your possible future business interactions, after graduating from this Master Programme of Danubius University. GOODS SALES CONTRACT A. Identities of the Parties Paragraph 1. _______________________, HEREINAFTER REFERRED TO AS SELLER, AND _____________________, HEREINAFTER REFERRED TO AS BUYER, HEREBY AGREE ON THIS ____ DAY OF _______________, IN THE YEAR ____________, TO THE FOLLOWING TERMS. Paragraph 2. SELLER, WHOSE BUSINESS ADDRESS IS _____________________, IN THE CITY OF _______________, STATE OF _________________________, IS IN THE BUSINESS OF ___________________________. BUYER, WHOSE BUSINESS ADDRESS IS ____________________, IN THE CITY OF _________________, STATE OF _________________________, IS IN THE BUSINESS OF ____________________________. B. Description of the Goods

Paragraph 3. Seller agrees to transfer and deliver to Buyer, on or before ________________________ [date], the below-described goods: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ ____________________________ C. Buyers Rights and Obligations Paragraph 4. Buyer agrees to accept the goods and pay for them according to the terms further set out below.

Paragraph 5. Buyer agrees to pay for the goods:

o In full upon receipt

o In installments, as billed by Seller, and subject to the separate installment sale contract of __________________[date] between Seller and Buyer.

o Half upon receipt, with the remainder due within 30 days of delivery.

Paragraph 6. Goods are deemed received by Buyer upon delivery to Buyers address as set forth above.

Paragraph 7. Buyer has the right to examine the goods upon receipt and has ____ days in which to notify seller of any claim for damages based on the condition, grade, quantity or quality of the goods. Such notice must specify in detail the particulars of the claim. Failure to provide such notice within the requisite time period constitutes irrevocable acceptance of the goods.

D. Sellers Obligations Paragraph 8. Until received by Buyer, all risk of loss to the above-described goods is borne by Seller.

Paragraph 9. Seller warrants that the goods are free from any and all security interests, liens, and encumbrances. E. Attestation Paragraph 10. Agreed to this _____ day of _____, in the year ____________. By: ___________________________ ____________________________ Official Title:

On behalf of ______________________________________, Seller I certify that I am authorized to act and sign on behalf of Seller and that Seller is bound by my actions. ______ [initial] By: ___________________________ ____________________________ Official Title:

On behalf of _____________________________________, Buyer I certify that I am authorized to act and sign on behalf of Buyer and that Buyer is bound by my actions. ______ [initial] [NOTARY STAMP HERE]

INTERNATIONAL SALE CONTRACT

CONTRACT BETWEEN,

.............................................., WITH REGISTERED OFFICE AT: ..............................................., REPRESENTED BY (HEREAFTER REFERRED TO AS THE SELLER), AND ...................................., WITH REGISTERED OFFICE AT..............................................., REPRESENTED BY .. (HEREAFTER REFERRED TO AS THE BUYER). Both parties declare an interest in the sale and purchase of goods under the present contract and undertake to observe the following agreement:

Article 1 - Products

Under the present contract, the Seller undertakes to provide, and the Buyer to purchase:

[Alternative A]: the following Products and quantities ........................................

[Alternative B]: the Products and quantities as set out in Annex 1 of the present contract.

Article 2 - Price The total price of the Products which the Buyer undertakes to pay the Seller shall be .................... (figure in numbers and letters). The aforementioned price: [Alternative A]: is the sum total of the prices of all Products and quantities as set out in Article 1. [Alternative B]: is the sum total of the prices of all Products and quantities as set out in Annex 1. Both parties undertake to renegotiate the agreed price when affected by significant changes in the international market, or by political, economic or social situations in the country of dispatch or destination of the Product, which may damage the interests of either party.

Article 3 - Delivery conditions The Seller shall deliver the Products to ................... (mention the place: warehouse, port, airport, etc.), ..................... (city and country), under conditions: ..................... (INCOTERMS). The goods shall be delivered at the agreed place, and to the transport agent designated by the Buyer, at least twenty-four hours before the deadline established in the present contract. Should the Buyer fail to take charge of the goods on arrival, the Seller shall be entitled to demand the fulfilment of the contract and payment of the agreed price.

Article 4 - Packaging The Seller undertakes to deliver the Products hereunder, suitably wrapped and packaged for their specific characteristics and for the conditions of transport to be used.

Article 5 - Means of payment The Buyer undertakes to pay the total price which appears in the present contract. Payment of said price shall be effected by: [Alternative A]: cash, cheque or bank transfer to the account and bank branch designated by the Vendor.

[Alternative B]: bill of exchange or direct debit to the account and bank branch designated by the Vendor. [Alternative C]: irrevocable and guaranteed letter of credit payable to the account and bank branch designated by the Vendor. Article 6 - Date of payment The price shall be paid on the following terms: [Alternative A]: .......... %, being ..................... (write in letters), on signing the present contract; and the rest, being .................... (write in letters), on delivery of the goods. [Alternative B]: .......... %, being ..................... (write in letters), on submitting documents of property to the transport agent designated by the Buyer; and the rest, being .................... (write in letters), within .......... calendar days of receipt of the goods by the Buyer. [Alternative C]: within .......... calendar days of receipt of the goods by the Buyer. Article 7 - Delivery period The Seller undertakes to deliver the goods within .......... calendar days of receipt of: [Alternative A]: the signing of the present contract.

3. THE INTERNATIONAL AUDIT STANDARDS (IAS)

International Standards on Auditing (ISAs) are professional standards that deal with the independent auditor's responsibilities when conducting an audit of financial statements. ISAs contain objectives and requirements together with application and other explanatory material. The auditor is required to have an understanding of the entire text of an ISA, including its application and other explanatory material, to understand its objectives and to apply its requirements properly. In March 2009, the IAASB completed its Clarity Project and released its full set of 36 clarified ISAs and the clarified International Standard on Quality Control (ISQC) 1.

The Clarity Project involved a comprehensive review of all the ISAs and ISQC 1 to improve their clarity and, thereby, their consistent application. As part of the Clarity Project, the ISAs have also been enhanced relative to the general approach to the audit, to instill a focus on objectives, promote a thinking audit, and emphasize the importance of professional skepticism; and to focus on aspects of financial statements that generally have a higher risk of material misstatement in virtually all audits, for example, estimates and fair values, related parties, and use of service organizations. In addition, the ISAs include enhancements regarding: Quality of audit evidence; Using the work of others, to ensure that auditors are satisfied that there is an appropriate basis on which to rely on the work of others, and to rely on others only when it is appropriate to do so; and Auditor communications and reporting, to emphasize the importance of open and constructive dialogue between auditors and those charged with governance/management, and to help ensure that important matters are brought to users' attention in a clear and meaningful way. Each ISA is structured in separate sections: Introduction. Introductory material may include the purpose, scope, and subject matter of the ISA, in addition to the responsibilities of the auditor and others in the context in which the ISA is set. Objective. Each ISA contains a clear statement of the objective of the auditor in the audit area addressed by that ISA. Definitions. For greater understanding of the ISAs, applicable terms are defined in each ISA. Requirements. Each objective is supported by clearly stated requirements. Requirements are always expressed by the phrase "the auditor shall." Application and other explanatory material. The application and other explanatory material explains more precisely what a requirement means or is

intended to cover, or includes examples of procedures that may be appropriate under given circumstances.

4. FINANCIAL

AUDIT TRANSLATIONS

TERMINOLOGY

AND

SPECIALISED

4.1.

AUDIT-LIMITED VOCABULARY TRANSLATIONS (EXPLAINED)

SPECIFIC

TO

AUDIT

ISA = International Standards on Auditing (ISA) are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants (IFAC) through the International Auditing and Assurance Standards Board (IAASB). IAASB = International Auditing and Assurance Standards Board. It serves the public interest by: setting, independently and under its own authority, high-quality International Standards on Auditing (ISAs) and assurance standards, and facilitating the convergence of national and international auditing and assurance standards. This contributes to enhanced quality and uniformity of practice in these areas throughout the world, and strengthened public confidence in financial reporting. financial audit = A financial audit is the critical analysis of a business's financial records and documentations. It can be done at any level, from local to governmental. A financial audit or financial profile of the company will be released by the auditor or forensic accountant after completion of the analysis. These financial analyses are usually done by certified public accounting firms and forensic accountants who provide an objective view of the true financial integrity of a company. Audits are intended to show whether a company's financial documentation matches its financial claims. It is not uncommon for a business to employee an internal auditor to monitor financial controls of a company in addition to hiring outside auditors.

Auditor = an individual qualified (at the state level) to conduct audits. An auditor may be an internal auditor, i.e. an individual whose primary job function is to audit his or her own company, or an external auditor, i.e. an individual from outside the company, who typically is employed by an auditing firm who handles many different clients. auditor's report = a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an auditee). The report is subsequently provided to a user (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit. An auditors report is considered an essential tool when reporting financial information to users, particularly in business. Since many third-party users prefer, or even require financial information to be certified by an independent external auditor, many auditees rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. Some have even stated that financial information without an auditors report is essentially worthless for investing purposes.
4.2.

MINIMAL GENERAL ECONOMIC VOCABULARY NECESSARY IN BOTH AUDIT-ORIENTED AND ALSO OTHER TYPES OF ECONOMIC TRANSLATIONS (ENUMERATED)

VOCABULARY 1: COMPOUND WORDS WITH BUSINESS (ENGLISH ROMANIAN) business community - mediu de afaceri Business Cooperation Center - Centrul de Cooperare pentru Afaceri business day zi lucrtoare business expenses - cheltuieli de reprezentare business finance gestiune financiar a ntreprinderii business law - drept commercial

business premises - sediu al firmei business tax - tax comercial business travel - cltorie de afaceri VOCABULARY 2: WORD CLUSTERS (ROMANIAN ENGLISH) PIATA - MARKET piaa manipulatoare - false market piaa monetar - money market piaa monopolizatoare - money trust piaa restrns - narrow market piaa secundar - secondary market piaa de schimb - (foreign) exchange market EURO - EURO eurobon - euronote eurocard - eurocard eurocec - eurochecque eurocredit - eurocredit eurodepozit - eurodeposit eurohrtii comerciale - eurocommercial papers euroopiune - eurooption europia - euromarket europia de capitaluri - eurocapital market europia monetar - euromoney market eurovalute - eurocurrencies PRET - PRICE preul energiei - energy cost pre cerut - asking price pre competitiv - competitive price

pre convenit - agreed price pre correct - true and fair price pre de acceptare - acceptance price pre de achiziie - historical cost pre de cerere - demand price pre de factur - invoice price pre de ncepere a licitaiei - opening bid pre de livrare - delivered price pre de ofert - tender price pre de prob - probate price pre de rambursare - redemption price pre de rscumprare - repurchase price pre de referin - shadow price pre de vnzare - sale / selling price pre en detail - retail price pre en gross - wholesale price pre net - net price pre unitar - unit price IMPOZIT - LEVY, TAX impozit anticipat - withholding tax impozitare n strintate - foreign taxation impozitare la surs - tax deduction at source impozitare la sursa a salariatului - pay as you earn impozitare progresiv - graduated taxation / progressive taxation impozit direct - direct tax impozite locale - (local) rates impozite periodice - recurrent taxes impozit funciar - property tax/real estate tax impozit indirect - indirect tax impozit pe beneficii - profit tax

impozit pe capital - capital levy/taxes on capital impozit pe cifra de afaceri - turnover tax impozit pe circulaia mrfurilor - sales tax impozit pe profitul acumulat - accumulated profits tax impozit pe salarii - wages tax impozit pe teren - land tax impozit pe venit - income tax impozit pe venitul din capital - capital tax BANCA - BANK banc emitent - issuing bank banc eitent a creditului - openind bank banc pltitoare - paying bank banc central - central bank banc colectoare (ncasatoare) - collecting bank banc de investiii - investment bank banc naional - national bank banc negociatoare - negotiating bank banc universal - full service bank Banca European de Investiii - European Investment Bank/EIB Banca European pentru Reconstrucie i Dezvoltare - European Bank for Reconstruction & Development / EBRD Banca Internaional de reconstrucie i Dezvoltare / BIRD - International Bank for Reconstruction & Development/IBRD Banca Reglementrilor Internaionale / BRI - Bank for International Settlements/BIS 4.3. TRANSLATION EXERCISE Translate the following text using the vocabulary above and, where it is necessary, the ESP terms in Chapter 5:

The generally accepted auditing standards (GAAS) are the standards you use for auditing private companies. GAAS come in three categories: general standards, standards of fieldwork, and standards of reporting. Keep in mind that the GAAS are the minimum standards you use for auditing private companies. Additionally, the Public Company Accounting Oversight Board (PCAOB) has adopted these standards for public (traded on the open market) companies. Each audit engagement you work on may require you to perform audit work beyond whats specified in the GAAS in order to appropriately issue an opinion that a set of financial statements is fairly presented. You need to use professional judgment and exercise due care in following all standards. General standards: The first three GAAS are general standards that address your qualifications to be an auditor and the minimum standards for your work product: job: Your work is adequately planned, and all assistants are properly supervised. You gain an understanding of the client and its environment, including internal controls, to assess the risk of material misstatement in the financial statements and to plan your audit. The evidence you gather during the audit is appropriate and sufficient to evaluate managements assertions on the financial statements. Standards of reporting: The last four GAAS concern information you must consider prior to issuing your audit report: You have to state whether the financial statements are prepared using generally accepted accounting principles (GAAP). Just as important is to report whether GAAP are consistently applied for all financial accounting. Should this not be the case, you have to report any departures. As an auditor, you must have both adequate training and proficiency. You are independent in both fact and appearance. You exercise due professional care in performing your auditing tasks. Standards of fieldwork: The next three GAAS govern how you actually do your

You also have to make sure that disclosures any additional information needed to explain the numbers on the financial statements are provided. Lastly, you have to include your opinion as to whether the financial statements present fairly in all material respects the financial position of the company under audit.

5. THE ESP (ENGLISH FOR SPECIAL PURPOSES) FOR AUDIT ACTIVITIES English for Specific Purposes (ESP) is a sphere of teaching English language including Business English, Technical English, Scientific English, English for tourism, etc. Characteristics: ESP is defined to meet specific needs of the learners. ESP makes use of underlying methodology and activities of the discipline it serves. ESP may be related to or designed for specific disciplines ESP may use, in specific teaching situations, a different methodology from that of General English ESP is generally designed for intermediate or undergraduates or master students. Most ESP courses assume some basic knowledge of the language systems Therefore, ESP points at a specific language area in our case FINANCIAL AUDIT COMMUNICATION IN ENGLISH - and does mainly refer to specific items of vocabulary (semantics and pragmatics) together with other linguistic issues liable to connect with audit activities. Or, to put it differently, every profession has its own lexicon. To communicate with auditors and supervisors or else, as a future auditor having to communicate with the audited companys staff you, must know key auditing phrases. As an audit master student, knowing these English terms becomes helpful if you are reading the international technical literature in the field - which is quite obliging if you are or will be only a

business owner who will be audited in the future, because auditors sometimes forget to switch from audit-specific talk to regular language when speaking with you a specialist in the field. Such particular vocabulary, which will be encountered in many translations, are items are:
-

Audit evidence: Facts gathered during the audit procedures that provide a reasonable basis for forming an opinion regarding the financial statements under audit.

Audit risk: The risk of forming an inappropriate opinion on the financial statements under audit. Control risk: The risk that a companys internal controls wont detect or prevent mistakes. Due professional care: Taking the time to gather reasonable audit evidence to support the fact that the financial statements are free of material misstatement.

Generally accepted accounting principles (GAAP): Standard U.S. accounting guidelines for reporting financial statement transactions. (necessary in translating US technical literature for getting informed)

Generally accepted auditing standards (GAAS): Standard U.S. auditing guidelines for planning, conducting, and reporting on audits. . (necessary in translating US technical literature for getting informed)

Going concern: The expectation that a business will remain operating for at least another 12 months. Independence: Having an arms-length relationship meaning no special or close relationship with the client under audit. Inherent risk: The likelihood of arriving at an inaccurate audit conclusion based on the nature of the clients business. Internal controls: The operating standards a client uses to prevent or uncover mistakes. Management assertions: Representations the managers of a company make on the financial statements.

Materiality: The importance placed on an area of financial reporting based on its overall significance. Objectivity: The ability to evaluate client records with no preconceived notions or prejudices. Professional scepticism: Approaching an audit with a questioning mindset. Sampling: Selecting a small but pertinent and representative number of records to represent the entire population of records.

6. THE

ESSENTIAL STRUCTURE OF A WRITTEN AUDIT COMMUNICATION BETWEEN PERFORMER AND BENEFICIARY TO OBTAIN EFFICIENT AUDIT EVIDENCE

Here we are to refer to only the financial audit contracts as main documents describing the relationship between the performer and beneficiary of audit activities: 6.1. FINANCIAL AUDIT CONTRACT SAMPLE IN ROMANIAN

Task: Fill in the gaps and translate it into English: Art. 1. PRTILE CONTRACTANTE S.C. ..........................., cu sediul n ............................., nregistrat la Registrul Comertului sub nr. ......................., avnd cont nr. ............ deschis la ................, cod fiscal ......................, reprezentat de ctre ........................, denumit n prezentul contract AUDITOR, si S.C. ..........................., cu sediul n ............................., nregistrat la Registrul Comertului sub nr. ......................., avnd cont nr. ............ deschis la ................, cod fiscal ......................, reprezentat de ctre .........................., denumit n prezentul contract BENEFICIAR

Au convenit ncheierea urmtorului contract, n conformitate cu prevederile O.U.G. nr. 75/1999 privind activitatea de audit financiar. Art. 2. OBIECTUL CONTRACTULUI Obiectul contractului l constituie verificarea de ctre auditor, a situatiilor financiare ale beneficiarului, contra unui onorariu. Opinia auditorului cu privire la conturile anuale va fi prezentat n "Raportul de Audit" si se va sprijini pe rezultatele activittii desfsurate n cursul anului. Art. 3. DURATA CONTRACTULUI Prezentul contract se ncheie pe o durat de ................ si intr n vigoare de la data semnrii lui. Art. 4. ONORARIUL AUDITORULUI Beneficiarul va plti auditorului pentru activitile prestate un onorariu de .......... lei pe lun, pltibil la data de ............. ale fiecrei luni pe ntreaga durat a contractului. Plata se face prin virament n contul auditorului nr. .........., deschis la Banca .......... Onorariul se poate renegocia anual. Art. 5. OBLIGATIILE AUDITORULUI Auditorul se oblig: - s verifice situatiilor financiare ale beneficiarului;

- s ntocmeasc anual "Raportul de Audit" si s rspund pentru realitatea datelor din acesta. Art. 6. OBLIGATIILE BENEFICIARULUI Beneficiarul se oblig: - s plteasc auditorului onorariul la termenele si n conditiile stabilite n prezentul contract; - s furnizeze date, documente si informatii corecte asupra activittii societii pentru realizarea lucrrilor si prestatiilor prevzute n contract de ctre auditor. Art. 7. CONFIDENTIALITATE Prile se oblig s asigure deplina confidenialitate a lucrrilor. Art. 8. RSPUNDEREA CONTRACTUAL Beneficiarul va plti penalitati de ntrziere de .... % pentru fiecare zi de ntrziere de la plata onorariului auditorului. Partea care invoc nendeplinirea obligatiile contractuale de ctre cealalt parte, poate cere daune interese. Art. 9. FORTA MAJOR Orice mprejurare independent de vointa prtilor contractante, intervenit dup data semnrii contractului si care mpiedic executarea acestuia este considerat ca fort major si exonereaz de rspundere partea care o invoc. Sunt considerate ca fort major, n sensul acestei clauze, mprejurri ca: rzboi, revolutie, calamitti. Partea care

invoc forta major trebuie s anunte cealalt parte n termen de 10 zile de la data aparitiei respectivului caz de fort major. Dup ncetarea cazului de fort major, partea care l-a invocat, si va relua obligatiile contractuale n termen de 3 zile si va anunta cealalt parte. Dac nu procedeaz la anuntarea, n termenele prevzute mai sus, a nceperii si ncetrii cazului de fort major, partea care l invoc va suporta toate daunele provocate celeilalte prti prin neanuntarea n termen. Art. 10. NCETAREA CONTRACTULUI Prezentul contract nceteaz prin rezilierea de ctre oricare dintre prti cu o notificare prealabil de 15 zile nainte de data propus pentru reziliere. Art. 11. LITIGII Litigiile care vor izvor din prezentul contract sau n legtur cu prezentul contract, inclusiv cele referitoare la validitatea, interpretarea, executarea sau desfiintarea lui, vor fi solutionate pe cale amiabil. Dac prtile nu vor ajunge la o ntelegere amiabil, atunci litigiile vor fi naintate spre solutionare instantelor competente. Art. 12. Prezentul contract se ncheie n . exemplare, din care un exemplar se depune la Filiala Corpului Expertilor Contabili si Contabililor Autorizati din Romnia n raza creia si are sediul prestatorul, n termen de ..... zile de la ncheiere. AUDITOR, BENEFICIAR

6.2.

SAMPLE AUDIT AGREEMENT IN ENGLISH

Task: Fill in the blanks and translate it into Romanian: 1. This Agreement, between ______________________(the Organization)

and____________________(the Contractor), shall be effective as of the date of execution below. 2. The Contractor will audit the financial records, accounts and statements of (the Organization) as of ________________and for the year ended ______________. All programs to be audited are as contained in Exhibit A, which is attached to and is a part of this contract. 3. The audit will be conducted in accordance with generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the Audit Guide for Audits of DECD Programs ("DECD Audit Guide"). In addition, if applicable, the audit will be conducted in accordance with the State Single Audit Act (CGS 4-230 to 4-236) and/or the Federal Single Audit Act, Office of Management and Budget (OMB) Circular A-133. 4. The audit will include tests of the accounting records and such other audit procedures as necessary to express an independent opinion on the financial statements and Reports on Compliance with Laws and Regulations and the Internal Control Structure. 5. The Contractor will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Under the concept of reasonable assurance, the Contractor will exercise its judgement about the number of transactions to be examined and the areas to be tested. There is, therefore, a risk that material errors, irregularities or illegal acts, including fraud or defalcations, may exist and not be detected. The Contractor will, however, advise immediately the DECD of any such matters that come to its attention. The Contractors responsibility is limited to the period covered by the audit and does not extend to matters that might arise during any later periods. 6. The Contractor, as part of the engagement, will request written representations from (the Organization) attorneys. Prior to the conclusion of the audit, the Contractor will also request certain written representations from (the Organization) management about the

financial statements and related matters. It is understood that these financial statements are the responsibility of management. This responsibility includes the maintenance of adequate records and related internal control structure policies and procedures, the selection and application of accounting principles, and the safeguarding of assets. The Contractor will advise management about the appropriate accounting principles and their application, and will assist in the preparation of the financial statements, if necessary. 7. The Contractor understands that it has the responsibility: a. to prepare the audit reports in accordance with the requirements of Government Auditing Standards, the DECD Audit Guide (and the State Single Audit Act (CGS 4-230 to 4-236) and/or the Federal Single Audit Act (OMB Circular A-133) as applicable); and b. to notify DECD within five (5) business days of its termination or cessation of services to the (organization). 8. If the Contractor ascertains that the (organizations) books and records are not in a sufficiently satisfactory condition for performing an audit, the Contractor shall disclose this deficiency to the (organization). If the (organization) cannot get its books ready for an audit within 15 days, then the Contractor should notify the DECD. Notification to the DECD shall be by written communication addressed to the Executive Director, DECD Audit Division, 505 Hudson Street, Hartford, Connecticut 06106. The Contractor shall await further instructions from the DECD before continuing the audit. 9. Entrance and exit conferences will be held with the (the Organization) management, and the Contractor representatives. 10. (The Organization) management responses to draft audit reports will be delivered to the Contractor for inclusion in the final reports, where practical. 11. The contractor will deliver to the (the Organization): a. Two copies of the draft audit reports no later than ____________________. b. The original and ___copies of the financial audit reports no later than 180 days after the audited year-end. c. If a state single audit and/or Federal Single Audit is required, copies of the report must be distributed to the agencies as indicated in the respective laws and regulations within the time frames imposed by such Acts.

12. In consideration for the satisfactory performance of the audit, the Contractor will receive ------------------------------------paid as follows----------------------------------------------------------------13. The Contractor will immediately notify the (Organization) of any significant and/or reportable conditions noted during the course of the audit. 14. Audit working papers will be prepared in accordance with Government Auditing Standards, and will be retained by the Contractor for at least three (3) years from the date of the final audit report. The working papers will be available for examination upon request by authorized representatives of DECD, (and the Comptroller General of the United States and the State of Connecticut Office of Policy and Management if a Federal and/or State Single Audit are performed). The audit working papers will be subject to a Quality Assurance Review conducted by the DECD or its representative. DECD or its representatives shall be entitled to reproduce any or all of such documents at their expense for which provision shall be made at the time the need for reproduction arise. 15. The certifications numbered A through H are incorporated by reference and made a part of this Agreement. 16. In the event that there is a significant change in funding from the DECD and/or a change in the legal or regulatory requirements applicable to this audit, (the Organization) shall be allowed either to: 1) withdraw from this engagement after paying in full for any and all services rendered by (the Contractor) prior to the date of withdrawal; or 2) seek, without penalty, a negotiated modification of this agreement which would result in the satisfaction of the new legal requirements through the services to be performed under the modified agreement. 17. The (Organization) may, at its option and through affirmative action, extend this Agreement for the two (2) option periods covering FYXX and FYXX. (The Organization) decision on whether or not to exercise the option will be made separately for each of the option years and will be predicated upon the quality of performance during the prior contract period(s), the degree of the Contractors compliance with the contract schedule for deliverables, the availability of funds or other justifying reasons.

The contracts for the option years will be governed by the terms of this Agreement, except that due dates will be updated and the Contractor will be paid the following amounts for each of the two option periods. Option Period 1 . Option Period 2 18. The fees set by the Agreement are based upon the following assumptions: management will respond promptly to all requests for basic information and/or documentation; the books will have been posted through the year, all adjustments will have been posted; management personnel will prepare cash and other confirmations; and that year-end schedules supporting the account balances will be provided. 19. The Contractor will give an oral presentation of its audit report to the Board of Directors. 20. If circumstances arise that will require additional services and time by the Contractor, the Contractor will notify the (Organization) and obtain its agreement prior to undertaking such activities. The hourly fee for such agreed to services will be ____. 21. The terms of this Agreement may be modified only in writing, signed by duly authorized representatives of the parties. 22. If the parties are unable to resolve a dispute regarding the acceptability of deliverables under this agreement, the dispute will be submitted to the American Arbitration Association for resolution through binding arbitration. 23. This Agreement, which includes the matter specifically incorporated by reference, constitutes the entire agreement between the parties. 24. This Agreement has been made, and shall be construed, in accordance with the laws of the State of Connecticut. Executed on the _____ day of (Month), (Year) for the parties by their duly authorized representatives. --------------------------------------------------_______________________________ ______________________ [Authorized Organization Official] [Authorized Audit Firm] CERTIFICATIONS

A. The individual signing certifies that he/she is authorized to contract on behalf of the Contractor and to make these certifications. B. The individual signing certifies that the Contractor is not involved in any agreement to pay money or other consideration for the execution of this agreement, other than to an employee of the Contractor. C. The individual signing certifies that the Contractor meets the independence standards of the Government Auditing Standards issued by the Comptroller General of the United States. D. The individual signing certifies that he/she is aware that all individuals to be assigned to the audit have met the GAO Continuing Education Requirement of 80 hours of continuing education every two years; and that 24 hours of this education have been in subjects directly related to the auditing of government grants. E. The individual signing certifies that he/she has read and understands the GAO requirement of an external quality control review at least once every three years. F. The individual signing certifies that the Contractor, and any individuals to be assigned to the audit, do not have a record of substandard audit work and have not been debarred or suspended from doing work with any Federal, state of local government. (If the Contractor or any individual assigned to the audit has been found in violation of any state or AICPA professional standards, this information must be disclosed.) G. The individual signing certifies that the Contractor does carry professional malpractice insurance or is otherwise adequately self-insured. H. The individual signing certifies that the contractor does not discriminate against any employee or applicant for employment because of race, color, religion, sex, age, national origin, disability, or any other basis prohibited by law. The contractor shall take affirmative action to insure that employees are treated during their employment, without regard to race, colour, religion, sex, age, national origin, disability, or any other basis prohibited by law. Such action shall include, but not be limited to, the following: employment, upgrading, demotion, or forms of compensation; and selection for training, including apprenticeship. The Contractor will, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state all qualified applicants will

receive consideration for employment without regard to race, color, religion, sex, national origin, disability or any other basis prohibited by law. Dated this________ day of _______________, 20____ ____________________________________ (Contractors Name) _____________________________________ (Signature of Contractors Representative) _____________________________________ (Printed Name and Title of Individual Signing)

7. THE ESSENTIAL STRUCTURE OF AN ORAL PRESENTATION IN

AUDIT ACTIVITIES 7.1. THE ABILITY TO COMMUNICATE IN FINANCIAL AUDIT ACTIVITIES The ability to communicate, and communicate well, is one of the biggest factors in business success. You could be an excellent designer, but if you are unable to promote your services and communicate effectively with clients and colleagues, your potential is limited. The principal areas where communication is essential include: Pitching potential clients, Client meetings, Customer service, Face-to-face networking, Marketing your business

Pitching potential clients - When you freelance or own a business, your livelihood depends on your ability to sell your services. You need to be able to convince prospects that you are the best person for the job, and the communication details in this third chapter will help you understand that a good start in a business involving foreign partners

is well supported by a solid knowledge of English and clearly-defined communication skills. Communicate Professionally - Your professionalism can win you contracts, and your communication skills add to the complete package. Take time to proofread all emails prior to sending; use a business email address with a proper signature; answer the phone professionally; and speak articulately and competently at all times. Client meetings, even those that take place over the telephone, are an integral part of every successful business. Schedule and Prepare Thoroughly - Were all busy these days, so scheduling your meetings in advance ensures that you and your clients have an adequate amount of uninterrupted time to speak. Once your meeting is scheduled, take time to prepare an agenda that outlines focus points and sets a structure. Sharing the agenda for the meeting gives both you and the client an opportunity to fully prepare. Because you may not be using the same calendar or scheduling program as your client, confirming the date and time of your meetings in an email and sending a reminder and the agenda the day before is good practice. If you are unsure how to format an agenda, plenty of templates are available for free online. Speak, Pause, Listen - When you have several topics to tackle, rushing through them to get all of your ideas out may be tempting. But this causes confusion and makes the client feel that their input is not important. Slow down, and remember that communication is a two-way street. Establish a give-and-take that allows both parties to have their say. One way to become a better listener is to limit or eliminate distractions during your conversations. That may mean closing your email client, turning off the television and closing the door to your office. By doing these small things, you ensure that the client has your full attention, and they will sense that, too. Follow Up in Writing - While you may be taking notes during phone or in-person meetings, the other party might not be, so follow up after the meeting with a written message, giving an overview of the discussion to make sure you are both on the same page. Summarize what was agreed, repeat questions that were raised and outline the next steps and responsibilities for both parties. In addition to sending your notes, invite the

other party to give their feedback on what you have sent. This way, it becomes a collaborative document and not just one persons view. Ask for Feedback - One way to maintain long-term relationships with your clients is by keeping open lines of communication. This means asking them for their input on how things are going and how they feel about the service youre providing. This can be accomplished by inquiring at the end of a project, during day-to-day conversations or through formal surveys. The format matters less than the actual act of it, so work it into your business and fine tune as you go along.

7.2.

THE ESSENTIAL STRUCTURE OF AN ORAL PRESENTATION IN PERFORMING AUDIT ACTIVITIES

The criteria used to characterize an Oral Presentation must include: In Teams: 1. Introduction of Team Members2. Title of theme- Outline of the whole presentation3. General Purpose- Interest arousal4. Presentation style + Enthusiasm5. Introduction & Conclusion of theme (including thesis statement + restatement of thesis)6. Collaboration among/transition between team members- Questions elicited7. Visual Aids used in common8. Timing of presentation. Individually: 1. Title of the topic presented- Goal of presentation (explanation)2. Outline of individual presentation + Organization. 3. Introduction: Interest arousal + thesis statement. 4. Facts provided (remember to paraphrase) along with sources/references

(A statement about where information used in the presentation was obtained from) 5. Personal Analysis 6. Activities used to make sure the students have grasped the information provided (ex: short quiz, questionnaire, item ranking...). 7. Presentation style combined with enthusiasm. 8. Language. 9. Visual aids used: overhead transparencies or PowerPoint slides to visually present the major points. 10. Conclusion/brief review of all major points covered in the presentation. Conclusion of the Theme. The presentation must: -Meet stated goal. -Arouse interest. -Include at least one activity that provides an opportunity to reflect on, experiment with, or practice some aspect of the presentation topic. -Provide sources for further information. -Are clear: voice projection, enunciation of words, knowledge of information. (Oral) -Deliver properly: you should be energetic/enthusiastic; exhibit adequate preparation and rehearsal. (Oral) -Include transition between speakers. (Oral) -Show a professional appearance. (Oral) -Are well-organized. -Use proper transition words. -Use sub dividers between the individual topics (In the booklet) -Use headings and subheadings that show a good and logical categorization: -There should be a logical progression of ideas, and ideas should flow smoothly.
8. THE ESSENTIAL STRUCTURE OF A WRITTEN REPORT IN AUDIT

ACTIVITIES 8.1. PRELIMINARY BASICS

Every successful audit is based on sound planning and an atmosphere of constructive involvement and communication between the client and the auditor. It actually provides a resource for sharing tools and techniques for each of the distinct phases of the audit process. Although every audit project is unique, the audit process is similar for most engagements and normally consists of four stages: Planning (sometimes called Survey or Preliminary Review), Fieldwork, Audit Report, and Follow-up Review. Client involvement is critical at each stage of the audit process. As in any special project, an audit results in a certain amount of time being diverted from the department's usual routine. One of the key objectives is to minimize this time and avoid disrupting ongoing activities. Following are some sample flowcharts of the process from audited organizations, that you may find helpful: Planning : During the planning portion of the audit, the auditor notifies the client of the audit, discusses the scope and objectives of the examination in a formal meeting with organization management, gathers information on important processes, evaluates existing controls, and plans the remaining audit steps. Announcement Letter: The client is informed of the audit through an announcement or engagement letter from the Internal Audit Director. This letter communicates the scope and objectives of the audit, the auditors assigned to the project and other relevant information. Initial Meeting: During this opening conference meeting, the client describes the unit or system to be reviewed, the organization, available resources (personnel, facilities, equipment, funds), and other relevant information. The internal auditor meets with the senior officer directly responsible for the unit under review and any staff members s/he wishes to include. It is important that the client identify issues or areas of special concern that should be addressed. Preliminary Survey: In this phase the auditor gathers relevant information about the unit in order to obtain a general overview of operations. S/He talks with key personnel and reviews reports, files, and other sources of information. Internal Control Review: The auditor will review the unit's internal control structure, a process which is usually time-consuming. In doing this, the auditor uses a

variety of tools and techniques to gather and analyze information about the operation. The review of internal controls helps the auditor determine the areas of highest risk and design tests to be performed in the fieldwork section. Click here for an annual internal control review plan. Audit Program: Preparation of the audit program concludes the preliminary review phase. This program outlines the fieldwork necessary to achieve the audit objectives. Fieldwork: The fieldwork concentrates on transaction testing and informal communications. It is during this phase that the auditor determines whether the controls identified during the preliminary review are operating properly and in the manner described by the client. The fieldwork stage concludes with a list of significant findings from which the auditor will prepare a draft of the audit report. Transaction Testing: After completing the preliminary review, the auditor performs the procedures in the audit program. These procedures usually test the major internal controls and the accuracy and propriety of the transactions. Various techniques including sampling are used during the fieldwork phase. Advice and Informal Communications: As the fieldwork progresses, the auditor discusses any significant findings with the client. Hopefully, the client can offer insights and work with the auditor to determine the best method of resolving the finding. Usually these communications are oral. However, in more complex situations, memos and/or e-mails are written in order to ensure full understanding by the client and the auditor. Our goal: No surprises. Audit Summary: Upon completion of the fieldwork, the auditor summarizes the audit findings, conclusions, and recommendations necessary for the audit report discussion draft. Working Papers: Working papers are a vital tool of the audit profession. They are the support of the audit opinion. They connect the clients accounting records and financials to the auditors opinion. They are comprehensive and serve many functions. Audit Report: Our principal product is the final report in which we express our opinions, present the audit findings, and discuss recommendations for improvements. To facilitate communication and ensure that the recommendations presented in the final

report are practical, Internal Audit discusses the rough draft with the client prior to issuing the final report. For an audit report template including an executive summary click here. Discussion Draft: At the conclusion of fieldwork, the auditor drafts the report. Audit management thoroughly reviews the audit working papers and the discussion draft before it is presented to the client for comment. This discussion draft is prepared for the unit's operating management and is submitted for the client's review before the exit conference. Exit Conference: When audit management has approved the discussion draft, Internal Audit meets with the unit's management team to discuss the findings, recommendations, and text of the draft. At this meeting, the client comments on the draft and the group works to reach an agreement on the audit findings. Formal Draft: The auditor then prepares a formal draft, taking into account any revisions resulting from the exit conference and other discussions. When the changes have been reviewed by audit management and the client, the final report is issued. Final Report: Internal Audit prints and distributes the final report to the unit's operating management, the unit's reporting supervisor, the Vice President for Administration, the University Chief Accountant, and other appropriate members of senior University management. This report is primarily for internal University management use. The approval of the Internal Audit Director is required for release of the report outside of the University. Client Response: The client has the opportunity to respond to the audit findings prior to issuance of the final report which can be included or attached to our final report. However, if the client decides to respond after we issue the report, the first page of the final report is a letter requesting the client's written response to the report recommendations. In the response, the client should explain how report findings will be resolved and include an implementation timetable. In some cases, managers may choose to respond with a decision not to implement an audit recommendation and to accept the risks associated with an audit finding. The client should copy the response to all

recipients of the final report if s/he decides not to have their response included/attached to Internal Audit's final report. Client Comments: Finally, as part of Internal Audit's self-evaluation program, we ask clients to comment on Internal Audit's performance. This feedback has proven to be very beneficial to us, and we have made changes in our procedures as a result of clients' suggestions. Audit Follow-Up: Within approximately one year of the final report, Internal Audit will perform a follow-up review to verify the resolution of the report findings. Follow-up Review: The client response letter is reviewed and the actions taken to resolve the audit report findings may be tested to ensure that the desired results were achieved. All unresolved findings will be discussed in the follow-up report. Follow-up Report: The review will conclude with a follow-up report which lists the actions taken by the client to resolve the original report findings. Unresolved findings will also appear in the follow-up report and will include a brief description of the finding, the original audit recommendation, the client response, the current condition, and the continued exposure to Indiana University. A discussion draft of each report with unresolved findings is circulated to the client before the report is issued. The follow-up review results will be circulated to the original report recipients and other University officials as deemed appropriate. Internal Audit Annual Report to the Board: In addition to the distribution discussed earlier, the contents of the audit report, client response, and follow-up report may also communicated to the Audit Committee of the Board as part of the Internal Audit Annual Report. The Process - A Collaborative Effort: As pointed out, during each stage in the audit process--preliminary review, field work, audit reports, and follow-up--clients have the opportunity to participate. There is no doubt that the process works best when client management and Internal Audit have a solid working relationship based on clear and continuing communication. Many clients extend this working relationship beyond the particular audit. Once the audit department has worked with management on a project, we have an understanding of the unique characteristics of the unit's operations. As a result, you can

help evaluate the feasibility of making further changes or modifications in your operations.

8.2.

SAMPLE OF AUDITORS REPORT

To, The Members of XYZ (India) LTD.

1.

We have audited the attached Balance Sheet of XYZ (India) Ltd. Jaipur.

As at 31st March 2008 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. Companies

As required by the Companies (Auditors Report) Order,2003 and amendments

thereto issued by the Central Government of India in terms of Sec 227(4A) of The Act 1956, we annex hereto a statement on the matters specified in the paragraphs 4 and 5 of the said order, to the extent applicable to the Company. 4. (i) (ii) We further report that : We have obtained all the information and explanations which to the best of In our opinion, proper books of account as required by law have been kept

our knowledge and belief were necessary for the purposes of our audit; by the company so far as appears from our examination of those books; (iii) (iv) The Balance Sheet and Profit and Loss Account dealt with by this report In our opinion, the Balance Sheet and Profit and Loss account dealt with

are in agreement with the books of account; by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the directors, as on 31st March 2008, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2008 from being appointed as a director in terms of clause (g) of sub-section(1) of section 274 of the Companies Act, 1956; (vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i)

in the case of the Balance Sheet of the state of affairs of the Company in the case of Profit and Loss Account, of the Profit for the year ended

as at 31st March 2008; and (ii) on that date. ForXYZ & CO.. Chartered Accountants

JAIPUR Dated: September 05th, 2008

(CA NAME) M. No.

Annexure to Auditors Report Annexure referred to in paragraph 2 of the auditors report to the members of Sysgen Biotec (India) Limited, Jaipur for the year ended 31st March, 2008 As required by the companies (Auditor Report) Order , 2003 and amendments thereto and according to the information and explanations given to us during the course of the audit and on the basis of such checks of the books and records as were considered appropriate we report that: (i) a) The company has maintained proper record showing full particulars including

quantitative details and situations of fixed assets. b) All the assets have been physically verified by the management in accordance with a phased programme of verification, which in our opinion is reasonable, considering the size and the nature of business. The frequency of verification is reasonable and no material discrepancies have been noticed on such physical verification. c) The assets disposed during the year are not significant and therefore do not affect the on going concern assumptions.

(ii)

a) The inventories have been physically verified by the management during the year

at reasonable intervals. b) The procedure of physical verification of the inventories followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business. c) The Company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to books records were not material. (iii) a) The company has not granted unsecured loan to party covered in the register

maintained under section 301 of the Companies Act, 1956. b) In view of our comments in Para (iii) (a) above, clauses 4 (iii) (b) (c) and (d) of the

said order are not applicable to the company. c) The company has taken unsecured loan from two parties covered in the register

maintained under section 301 of the Companies Act, 1956 on all basis. The Maximum amount outstanding during the year was Rs. 420800/- and Rs. 120000 the year ended balance was Rs. 560800/-. d) The other terms and conditions on which the loans have been taken are prima facie,

not prejudicial to the interest of the company; e) In view of our comments in para (iii) (c) and (d) above, clause (iii) (g) of the said

order is not applicable to the company (iv) There are adequate internal control systems commensurate with the size of the

company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods and services. During the course of our audit no major weakness has been observed in the internal control system.

(v) a) The transactions made in pursuance of contract or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 has been recorded in the register. b) The transactions made in pursuance of contract or arrangements that need to be

entered into the register maintained under section 301 of the Companies Act, 1956 has been recorded in the register. (vi) The company has not accepted any deposits from the public within the meaning of the sections 58A, 58AA or any other relevant provision of the Act and the rules framed there under any directives report issued by the Reserve Bank of India. No order in relation thereto has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. (vii) The Company has formal internal audit system commensurate with its size and

nature of its business. (viii) The Central Government has not prescribed for maintenance of cost records under

section 209 (1) (d) of the Companies Act, 1956 for the company. (ix) a) According to the records of the company, the undisputed statutory dues

including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty and Excise Duty, Cess have regularly deposited with the appropriate authorities. There are no undisputed amount payable in respect of such statutory which have remained outstanding as at 31st March, 2008 for a period more then six months from the date they became payable. b) There are no amount in respect of any disputed income tax, sales tax, wealth

tax, service tax, custom duty, excise duty and cess.

(x)

The company has accumulated losses of Rs.10.55 lacs at the end of the financial

year 2006-07 and it has incurred losses in current financial year of Rs.0.45 lacs. (xi) The Company has no defaulted in repayment of its dues to banks and financial

institutions. (xii) The company has not granted any loans or advances on the basis of security by

way of pledge of shares, debentures or other securities. (xiii) The provisions of any Special Statute applicable to Chit Fund, Nidhi Fund or

Mutual Benefit Fund/Societies are not applicable to the company. (xiv) In our opinion and according to the information and explanations given to us, the

company is not a dealer or trader in shares, securities, debentures and other investments. (xv) The company has not given any guarantee for loan taken by others from banks

and financial institutions. (xvi) In our opinion, the term loan have been applied for the purpose for which they

were raised. (xvii) On an overall examination the Balance Sheet of the company, we report that no

fund raised on short term basis have been used for long term investment. (xviii) (xix) (xxi) The company has not issued any equity shares and debentures during the year. The company has not raised any money by way of public issue during the year. During the course of our examination of the books and records of the company,

carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year.

For Nitin J. & Co. Chartered Accountants Nitin Goyal Mem No.: 400572 Place: Jaipur Date: 5th September, 2008

9. THE

NEGOTIATION OF AUDIT PERFORMANCE THE COMMERCIAL CONTRACT

9.1. NEGOTIATIONS AS PRELIMINARIES TO CONCLUDING CONTRACTS The word "negotiation" originated from the Latin expression, "negotiatus", past participle of negotiare which means "to carry on business". "Negotium" means literally "not leisure". Negotiation in trade and tourism is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy various interests of two person/ parties involved in negotiation process. Negotiation is a process where each party involved in negotiating tries to gain an advantage for themselves by the end of the process. Negotiation is intended to aim at compromise. Negotiation occurs in business, non-profit organizations, government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life. The study of the subject is called negotiation theory. Professional negotiators are often specialized, such as union negotiators, leverage buyout negotiators, peace negotiators, hostage negotiators, or may work under other titles, such as diplomats, legislators or brokers. Negotiation typically manifests itself with a trained negotiator acting on behalf of a particular organization or position. It can be compared to mediation where a neutral third party listens to each side's arguments and attempts to help craft an agreement between the parties. It is also related to arbitration which, as with a legal proceeding, both sides make an argument as to the merits of their "case" and then the arbitrator decides the outcome for both parties.

There are many different ways to segment negotiation to gain a greater understanding of the essential parts. One view of negotiation involves three basic elements: process, behavior and substance. The process refers to how the parties negotiate: the context of the negotiations, the parties to the negotiations, the tactics used by the parties, and the sequence and stages in which all of these play out. Behavior refers to the relationships among these parties, the communication between them and the styles they adopt. The substance refers to what the parties negotiate over: the agenda, the issues (positions and - more helpfully - interests), the options, and the agreement(s) reached at the end. Another view of negotiation comprises 4 elements: strategy, process and tools, and tactics. Strategy comprises the top level goals - typically including relationship and the final outcome. Processes and tools include the steps that will be followed and the roles taken in both preparing for and negotiating with the other parties. Tactics include more detailed statements and actions and responses to others' statements and actions. Some add to this persuasion and influence, asserting that these have become integral to modern day negotiation success, and so should not be omitted. Skilled negotiators may use a variety of tactics ranging from negotiation hypnosis, to a straight forward presentation of demands or setting of preconditions to more deceptive approaches such as cherry picking. Intimidation and salami tactics may also play a part in swaying the outcome of negotiations. Another negotiation tactic is bad guy/good guy. Bad guy/good guy tactic is when one negotiator acts as a bad guy by using anger and threats. The other negotiator acts as a good guy by being considerate and understanding. The good guy blames the bad guy for all the difficulties while trying to get concessions and agreement from the opponent. When a party pretends to negotiate, but secretly has no intention of compromising, the negotiator is considered to be negotiating in bad faith. Shell identified five styles/responses to negotiation. Individuals can often have strong dispositions towards numerous styles; the style used during a negotiation depends on the context and the interests of the other party, among other factors. In addition, styles can change over time.

Accommodating: Individuals who enjoy solving the other partys problems and preserving personal relationships. Accommodators are sensitive to the emotional states, body language, and verbal signals of the other parties. They can, however, feel taken advantage of in situations when the other party places little emphasis on the relationship. Avoiding: Individuals who do not like to negotiate and dont do it unless warranted. When negotiating, avoiders tend to defer and dodge the confrontational aspects of negotiating; however, they may be perceived as tactful and diplomatic. Collaborating: Individuals who enjoy negotiations that involve solving tough problems in creative ways. Collaborators are good at using negotiations to understand the concerns and interests of the other parties. They can, however, create problems by transforming simple situations into more complex ones. Competing: Individuals who enjoy negotiations because they present an opportunity to win something. Competitive negotiators have strong instincts for all aspects of negotiating and are often strategic. Because their style can dominate the bargaining process, competitive negotiators often neglect the importance of relationships. Compromising: Individuals who are eager to close the deal by doing what is fair and equal for all parties involved in the negotiation. Compromisers can be useful when there is limited time to complete the deal; however, compromisers often unnecessarily rush the negotiation process and make concessions too quickly. 9.2. DISTINCTIVE NEGOTIATION BEHAVIORS OF CULTURAL GROUPS SYNCHRONIC AND DIACHRONIC APPROACH Following are further descriptions of the distinctive aspects of each of the main cultural groups. Certainly, conclusions of statistical significant differences between individual cultures cannot be drawn without larger sample sizes. But, the suggested cultural differences are worthwhile to consider briefly. Israel. The behaviors of the Israeli negotiators were distinctive in three respects. As mentioned above, they used the lowest percentage of self-disclosures, apparently holding their cards relatively closely. Alternatively, they used by far the highest percentages of promises and recommendations, using these persuasive strategies

unusually heavily. They were also at the end of the scale on the percentage of normative appeals at 5 percent with the most frequent reference to competitors offers. Perhaps most importantly the Israeli negotiators interrupted one another much more frequently than negotiators from any other group. Indeed, this important nonverbal behavior is most likely to blame for the pushy stereotype often used by Americans to describe their Israeli negotiation partners. Germany. The behaviors of the Germans are difficult to characterize because they fell toward the center of almost all the continua. However, the Germans were exceptional in the high percentage of self-disclosures (47 percent) and the low percentage of questions (11 percent). Russia. The Russians style was quite different from that of any other European group, and, indeed, was quite similar in many respects to the style of the Japanese. They used no and you infrequently and used the most silent periods of any group. Only the Japanese did less facial gazing, and only the Chinese asked a greater percentage of questions. United Kingdom. The behaviors of the British negotiators were remarkably similar to those of the Americans in all respects. British people believe that most British negotiators have a strong sense of the right way to negotiate and the wrong. Protocol is of great importance. However, the right way to negotiate may be a completely different concept for people from different cultures. Some cultures may consider the British negotiation style as extremely cold and arrogant. Spain. Diga is perhaps a good metaphor for the Spanish approach to negotiations evinced in our data. When you make a phone call in Madrid, the usual greeting on the other end is not hola (hello) but is, instead, diga (speak). It is not surprising, then, that the Spaniards in the videotaped negotiations likewise used the highest percentage of commands (17 percent) of any of the groups and gave comparatively little information (self-disclosures, only 34 percent). Moreover, they interrupted one another more frequently than any other group, and they used the terms no and you very frequently. France. The style of the French negotiators was perhaps the most aggressive of all the groups. In particular, they used the highest percentage of threats and warnings (together, 8 percent). They also used interruptions, facial gazing, and no and you very

frequently compared with the other groups, and one of the French negotiators touched his partner on the arm during the simulation. Brazil. The Brazilian businesspeople, like the French and Spanish, were quite aggressive. They used the second-highest percentage of commands of all the groups. On average, the Brazilians said the word no 42 times, you 90 times, and touched one another on the arm about 5 times during 30 minutes of negotiation. Facial gazing was also high. Mexico. The patterns of Mexican behavior in our negotiations are good reminders of the dangers of regional or language-group generalizations. Both verbal and nonverbal behaviors were quite different than those of their Latin American (Brazilian) or continental (Spanish) cousins. Indeed, Mexicans answer the telephone with the much less demanding bueno (short for good day). In many respects, the Mexican behavior was very similar to that of the negotiators from the United States. French-Speaking Canada. The French-speaking Canadians behaved quite similarly to their continental cousins. Like the negotiators from France, they too used high percentages of threats and warnings, and even more interruptions and eye contact. Such an aggressive interaction style would not mix well with some of the more low-key styles of some of the Asian groups or with English speakers, including English-speaking Canadians. English-Speaking Canada. The Canadians who speak English as their first language used the lowest percentage of aggressive persuasive tactics (threats, warnings, and punishments totaled only 1 percent) of all 15 groups. Perhaps, as communications researchers suggest, such stylistic differences are the seeds of interethnic discord as witnessed in Canada over the years. With respect to international negotiations, the English-speaking Canadians used noticeably more interruptions and nos than negotiators from either of Canadas major trading partners, the United States and Japan. United States. Like the Germans and the British, the Americans fell in the middle of most continua. They did interrupt one another less frequently than all the others, but that was their sole distinction. Japan. Consistent with most descriptions of Japanese negotiation behavior, the results of this analysis suggest their style of interaction is among the least aggressive (or most polite). Threats, commands, and warnings appear to be de-emphasized in favor of

the more positive promises, recommendations, and commitments. Particularly indicative of their polite conversational style was their infrequent use of no and you and facial gazing, as well as more frequent silent periods. Korea. Perhaps one of the more interesting aspects of the analysis is the contrast of the Asian styles of negotiations. Non-Asians often generalize about the Orient; the findings demonstrate, however, that this is a mistake. Korean negotiators used considerably more punishments and commands than did the Japanese. Koreans used the word no and interrupted more than three times as frequently as the Japanese. Moreover, no silent periods occurred between Korean negotiators. China (Northern). The behaviors of the negotiators from Northern China (i.e., in and around Tianjin) were most remarkable in the emphasis on asking questions (34 percent). Indeed, 70 percent of the statements made by the Chinese negotiators were classified as information-exchange tactics. Other aspects of their behavior were quite similar to the Japanese, particularly the use of no and you and silent periods. Taiwan. The behavior of the businesspeople in Taiwan was quite different from that in China and Japan but similar to that in Korea. The Chinese on Taiwan were exceptional in the time of facial gazingon the average, almost 20 of 30 minutes. They asked fewer questions and provided more information (self-disclosures) than did any of the other Asian groups. These differences across the cultures are quite complex, and this material by itself should not be used to predict the behaviors of foreign counterparts. Instead, great care should be taken with respect to the aforementioned dangers of stereotypes. The key here is to be aware of these kinds of differences so that the Japanese silence, the Brazilian no, no, no, or the French threat are not misinterpreted. The Mediterranean culture .Warm greetings and social aspects. Exuberant uses of postures and gestures. difficulty in pinning discussions down to particular deals or particular phases of negotiation. In some regions, deals need to be 'lubricated'. Indeed, this question of 'lubrication' is central to the cultures of some Mediterranean countries. It is seen as a normal practice and does not have the repulsive character of 'bribery'.

The approach to negotiation in these cultures needs to retain the types of discipline we have been discussing; and yet to be conscious of the need for lubrication. Since no respectable western company would wish to be associated with the practice of bribery, the need is to secure a local agency and to ensure that that agency handles the lubrication. 9.3. THE PERSUASION PROCESS IN CONCLUDING A CONTRACT The first philosopher of note to break down the process of persuasion was Aristotle. He determined that there are three components necessary to effective persuasion: Logos which is the application of a logical argument Ethos which is basically the integrity of the messenger Pathos which is the emotional connection that that drives the action In that respect logos is logic, ethos is ethics, and pathos is emotion. In order to inspire your interlocutor to take action you must deliver a logical reason for him to do so. Since people dont buy based on logic though, it is necessary to infuse your sales message with an emotional appeal. And in order for them to even consider your message in the first place you must be perceived as a person of integrity from whom they would want to buy. In order to make a sale you must inspire your potential customer to take action. He must decide to do this on his own, you cant push him into it and expect the decision to stick. Thats where buyers remorse comes from. To make a legitimate sale that lasts long after you are gone all that is necessary is to create conditions that make it easy for your prospect to naturally say yes to your proposal in the first place. Why should they buy? That is where the logic in your pitch comes in. Why should they buy from you? That is where your own integrity comes into play. Why should they buy now?

That is where your emotional connection with them builds up desire until you give them the release valve of a buying action. These three elements must be present in any sales presentation you make in order to consistently make sales. Integrity is something we must work at maintaining every day. Empathy for our customers is something we must value and convey. And a logical reason to buy now must always be constructed in such a way that the message matches your chosen market. Persuasion is a form of social influence. It is the process of guiding oneself or another toward the adoption of an idea, attitude, or action by rational and symbolic (though not always logical) means. Persuasion methods are also sometimes referred to as persuasion tactics or persuasion strategies. Robert Cialdini, in his book on persuasion, defined six "weapons of influence": Reciprocity - People tend to return a favor. Thus, the pervasiveness of free samples in marketing and advertising. In his conferences, he often uses the example of Ethiopia providing thousands of dollars in humanitarian aid to Mexico just after the 1985 earthquake, despite Ethiopia suffering from a crippling famine and civil war at the time. Ethiopia had been reciprocating for the diplomatic support Mexico provided when Italy invaded Ethiopia in 1937. Commitment and Consistency - Once people commit to what they think is right, orally or in writing, they are more likely to honor that commitment, even if the original incentive or motivation is subsequently removed. For example, in car sales, suddenly raising the price at the last moment works because the buyer has already decided to buy. Social Proof - People will do things that they see other people are doing. For example, in one experiment, one or more confederates would look up into the sky; bystanders would then look up into the sky to see what they were seeing. At one point this experiment aborted, as so many people were looking up that they stopped traffic. See conformity, and the Asch conformity experiments. Authority - People will tend to obey authority figures, even if they are asked to perform objectionable acts. Cialdini cites incidents, such as the Milgram experiments in the early 1960s and the My Lai massacre in 1968.

Liking - People are easily persuaded by other people whom they like. Cialdini cites the marketing of Tupperware in what might now be called viral marketing. People were more likely to buy if they liked the person selling it to them. Some of the many biases favoring more attractive people are discussed, but generally more aesthetically pleasing people tend to use this influence excellently over others. See physical attractiveness stereotype. Scarcity - Perceived scarcity will generate demand. For example, saying offers are available for a "limited time only" encourages sales. In their book The Art of Woo, G. Richard Shell and Mario Moussa present a fourstep approach to strategic persuasion. They explain that persuasion means to win others over, not to defeat them. Thus it is important to be able to see the topic from different angles in order to anticipate the reaction others have to a proposal. Step 1: Survey your situation This step includes an analysis of the persuader's situation, goals, and challenges that he faces in his organization. Step 2: Confront the five barriers Five obstacles pose the greatest risks to a successful influence encounter: relationships, credibility, communication mismatches, belief systems, and interest and needs. Step 3: Make your pitch People need a solid reason to justify a decision, yet at the same time many decisions are made on the basis of intuition. This step also deals with presentation skills. Step 4: Secure your commitments In order to safeguard the longtime success of a persuasive decision, it is vital to deal with politics at both the individual and organizational level.

Conditioning plays a huge part in the concept of persuasion. It is more often about leading someone into taking certain actions of their own, rather than giving direct commands. In advertisements for example, this is done by attempting to connect a positive emotion to a brand/product logo. This is often done by creating commercials that make people laugh, using a sexual undertone, inserting uplifting images and/or music etc. and then ending the commercial with a brand/product logo. The thought is that it will affect how people view certain products, knowing that most purchases are made on the basis of emotion. Just like you something bring back a memory from a certain smell or sound, the objective of some ads is solely to bring back certain emotions when you see their logo in your local store. The hope is that by repeating the message several times it will cause the consumer to be more likely to purchase the product because he/she already connects it with a good emotion and a positive experience. We can briefly present a list of persuasion methods which we consider to be widely supportive for the persuasion process in concluding a contract: By appeal to reason: Logical argument Logic Rhetoric Scientific method Proof By appeal to emotion: Advertising Faith Presentation and Imagination Propaganda Tradition Pity Aids to persuasion: Body language Communication skill or Rhetoric

Sales techniques Personality tests and conflict style inventory help devise strategy based on an individual's preferred style of interaction Other techniques: Deception Subliminal advertising Power (sociology) Attitudes and persuasion are among the central issues of social behavior. One of the classic questions is when are attitudes a predictor of behavior. Previous research suggested that selective activation of left prefrontal cortex might increase the likelihood that an attitude would predict a relevant behavior. Using lateral attention manipulation, this was supported. 9.4. KEY STRATEGIES A SELLER CAN EMPLOY WHEN NEGOTIATING A SALE AND PURCHASE AGREEMENT 1. Debt balances: when calculating the value for shares consideration in the sale and purchase agreement, the seller could argue that balance sheet items are not debt (i.e. are not involved in the long term financing of the business). The seller could argue that these items shouldn't be deducted when moving from an initial headline debt-free-cash-free offer to the value for shares consideration. If debt items are not included and not deducted from the headline offer, shares consideration for the seller goes up. 2. Working capital: the seller could argue that the business has enough working capital. The seller could argue that the buyer should have known about working capital requirements for the business based on information previously released. This should help avoid a situation where a buyer tries to "chip" the sale price at the last minute, on the basis that the business does not carry enough working capital. 3. Target net asset value: the seller could argue that target net asset value should be referenced against an older balance sheet released early on in the transaction process, the same one the buyer referenced when they submitted their offer. Post deal completion auditors will measure the net asset value for the business. If actual net asset value, as

measured by the audit, is relatively high compared to the target net asset value, the buyer will have to pay more to the seller. 4. Completion accounts: the seller could argue against the introduction of new accounting policies (for example, discounting old debtors) that might result in lower asset values as determined by a post-completion audit. If asset values are robust, actual net asset value (as measured by the audit) will compare favourably against target net asset value. There will be less chance that the seller has to compensate the buyer.

10. ESSENTIAL ENGLISH ABILITIES FOR AUDIT TRAINING COURSES 10.1. FROM AUDIT TO ESSENTIAL ENGLISH KNOWLEDGE Financial audit activities require specific skills, among which the knowledge of English has quite a great deal of importance. Auditors have to continuously improve their professional knowledge field by reading the international technical literature and performing exchanges of experience with foreign experts. Therefore, the mastering of a very specialised vocabulary in the field at issue is more than significant in this particular context. The following list, added with the proper explanations is an invaluable tool for master students willing to improve their English with usage in audit:
o

acceptance sampling is sampling to determine whether internal control compliance is greater than or less than the tolerable deviation rate.

accounting and review services are governed by official pronouncements covering compilation and review engagements. Compilation is presenting in the form of financial statements information that is the representation of management (owners) without expressing assurance. Review is inquiry and analytical procedures to provide the accountant a basis for expressing limited assurance that there are no material modifications that should be made to the statements for them to be in conformity with U.S. generally accepted accounting principles.

accounting data includes journals, ledgers and other records, such as spreadsheets, that support financial statements. It may be in computer readable form or on paper.

accounting estimate An approximation of a financial statement element. Estimates are included in historical financial statements because some amounts are uncertain pending outcome of future events and relevant data about events that have occurred cannot be accumulated on a timely, cost-effective basis.

accounting principles are alternative ways of reporting and disclosing information in financial statements and related footnotes.

accounting records are the records of initial accounting entries and supporting records, such as checks and records of electronic fund transfers; invoices; contracts; the general and subsidiary ledgers; journal entries and other adjustments to the financial statements that are not reflected in journal entries; and records, such as work sheets and spreadsheets, supporting cost allocations, computations, reconciliations, and disclosures.

accounting research bulletins (ARBs) were issued years ago to set generally accepted accounting principles. Some have not been superseded by pronouncements of the Financial Accounting Standards Board. Those old pronouncements still qualify as generally accepted accounting principles.

agreed-upon procedures An engagement where the client specifies procedures and the accountant agrees to perform those procedures. An accountant may accept an engagement to apply agreed-upon procedures to financial statement elements, where the scope of the engagement is not sufficient to express an opinion, if the users assume responsibility for sufficiency of the procedures, and use of the report is restricted to specified users.

allowance for sampling risk The difference between a sample estimate and the projected population characteristic at a specified sampling risk. This allowance is also the difference between the expected error rate and the tolerable deviation rate.

audit adjustment is a correction of a financial information misstatement identified by the auditor, whether recorded or not.

audit committee A committee of the board of directors responsible for oversight of the financial reporting process, selection of the independent auditor, and receipt of audit results.

audit documentation (working papers) are records kept by the auditor of procedures applied, tests performed, information obtained, and pertinent conclusions reached in the engagement. The documentation provides the principal support for the auditor's report.

audit evidence is information used by the auditor in arriving at the conclusions on which the auditor's opinion is based.

audit objective In obtaining evidence in support of financial statement assertions, the auditor develops specific audit objectives in light of those assertions. For example, an objective related to the completeness assertion for inventory balances is that inventory quantities include all products, materials, and supplies on hand.

audit planning is developing an overall strategy for the audit. The nature, extent, and timing of planning varies with size and complexity of the entity, experience with the entity, and knowledge of the entity's business.

audit risk A combination of the risk that material errors will occur in the accounting process and the risk the errors will not be discovered by audit tests. Audit risk includes uncertainties due to sampling (sampling risk) and to other factors (nonsampling risk).

bill of lading A document issued by a carrier to a shipper, listing and acknowledging receipt of goods for transport and specifying terms of delivery.

blind trust A financial arrangement in which a person avoids possible conflict of interest by transferring financial affairs to a fiduciary who has sole asset management discretion. The person establishing the trust also gives up the right to information regarding the assets.

business risks are risks that could adversely affect an entity's ability to achieve its objectives and execute its strategies or from the setting of inappropriate objectives and strategies.

caveat A warning or caution. check digit A redundant digit added to a code to check accuracy of other characters in the code.

check register A listing of checks issued in numeric sequence and in order by date issued.

classification Arrangement or grouping. Assets and liabilities are normally classified as current or noncurrent.

collateralize To pledge property as security (collateral) for a debt. collusion A secret agreement between two or more parties for fraud or deceit. compare (comparison) An audit procedure. The auditor observes similarities and differences between items such as an account from one year to the next.

compensating balance An offsetting balance. A requirement by some banks that a borrower maintain a minimum balance in a checking or savings account as a condition of a loan. The offsetting balance increases the effective interest rate to

the bank since the net amount loaned is reduced but the interest paid is unchanged.
o

competence of an internal audit staff is a function of qualifications, including education, certification, and supervision.

compile (compilation) A compilation is presenting in the form of financial statements information that is the representation of management without expressing assurance. Compilation of a financial projection is assembling prospective statements based on assumptions of a responsible party, considering appropriateness of presentation, and issuing a compilation report. No assurance is provided on the statements or underlying assumptions. The accountant need not be independent.

disclosure Revealing information. Financial statement footnotes are one way of providing necessary disclosures.

discovery sampling Acceptance sampling (sampling to determine whether internal control compliance is greater than or less than the tolerable deviation rate) when the expected attribute occurrence rate is zero.

document (documentary) (documentation) Written or printed paper that bears information that can be used to furnish decisive evidence. Could also be a recording, computer readable information, or a photograph.

effective income tax rate The income tax provision (expense) shown on an income statement divided by pretax income. This differs from the statutory rate because of deductions, credits, and exclusions.

effective internal control Reasonable assurance that operational objectives are achieved, that published financial statements are reliably prepared, and that the entity complies with applicable laws and regulations.

effectiveness Producing a desired outcome. An audit procedure is effective if the evidence supports a correct conclusion.

efficiency The ratio of the audit evidence produced to audit resources used. embedded audit modules are included in the clients data processing systems to facilitate the acquisition of data needed by auditors.

embedded control performance deals with unexpected changes to data.

financial forecasts are prospective financial statements that present expected future financial position, results of operations, and cash flows based on expected conditions. A financial forecast is of the most likely future scenario.

financial projections are prospective financial statements that present, given one or more hypothetical assumptions, an entity's expected financial position, results of operations, and changes in financial position. A financial projection includes several alternative scenarios while a forecast is the single most likely scenario.

financial reporting framework is a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.

financial statements are a structured representation of historical financial information, including related notes, intended to communicate an entity's

economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.
o

flowchart A schematic representation of a sequence of operations in an accounting system or computer program. Also called a flow diagram or flow sheet.

general controls Policies and procedures to assure proper operation of computer systems, including controls over network operations, software acquisition and maintenance, and access security.

general journal A book of original entry in a double-entry system. The journal lists transactions and indicates accounts to which they are posted. The general journal includes all transactions not included in specialized journals used for cash receipts, cash disbursements, and other common transactions.

general ledger A record to which monetary transactions are posted (in the form of debits and credits) from a journal. It is the final record from which financial statements are prepared. General ledger accounts are often control accounts that report totals of details included in subsidiary ledgers.

generalized audit software Packaged computer programs used on a variety of computers during audit field work to read computer files, select information, perform calculations, create data files, and print reports in a format specified by the auditor.

gross margin percentage The gross margin from an income statement divided by net sales revenue.

hard copy A printed copy of information as opposed to information stored in computer readable form.

hardware A computer and associated physical equipment involved in data processing or communications functions as opposed to software (the computer programs that provide instructions the computer follows).

hardware control Computer controls built into physical equipment by the manufacturer.

hash total A control total that has no meaning in itself except for control, e.g., total social security numbers of employees paid.

implementation of internal control means the auditor determines that the relevant controls exist and that the entity is using them.

incompatible duties Internal control systems rely on separation of duties to reduce the chance of errors or fraud. Duties are incompatible if they should be separated for control. For example, one person should not be in a position to both embezzle funds and to hide the embezzlement by changing the recorded accountability.

incorrect acceptance The risk of incorrect acceptance is the risk the sample supports the conclusion that the recorded balance is not materially misstated when it is materially misstated.

incorrect rejection The risk of incorrect rejection is the risk the sample supports the conclusion that the recorded balance is materially misstated when it is not materially misstated.

independent In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditors. This means freedom from bias, which is possible even when auditing one's own business (independence in fact). However, it is important that the auditor be independent in appearance (that others believe the auditor is independent).

inference control is a control used in the output of databases to stop a person who has access to only summary information from being able to determine (infer) a particular value for a particular record.

internal auditors are employees of the client responsible for providing analyses, evaluations, assurances, recommendations, and other information to the entity's management and board. An important responsibility of internal auditors is to monitor performance of controls.

journal A book of original entry in a double-entry system. The journal lists all transactions and the accounts to which they are posted.

just-in-time An inventory system that attempts to minimize inventory costs that do not add value for the customer. It arranges for suppliers to deliver small quantities of raw materials just before those units are needed in production. Storing, insuring, and handling raw materials are costs that add no value to the product, and are minimized in a just in time system.

lapping A scheme to cover an embezzlement by using payments made by one customer to reduce the receivables balance of another customer.

lead schedule The schedule at the beginning of audit documentation that summarizes the detailed schedules.

lifo Last In First Out inventory cost flow.

management controls are controls performed by one or more managers. management representation letter A letter addressed to the auditor, signed by the client's chief executive officer and chief financial officer. During an audit, management makes many representations to the auditor. Written representations from management in the letter confirm oral representations given to the auditor, document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding.

management's specialist is an individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the entity to assist the entity in preparing the financial statements

material (materiality) Information important enough to change an investor's decision. Insignificant information has no effect on decisions, so there is no need to report it. Materiality includes the absolute value and relationship of an amount to other information.

misstatement is a difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework.

monitoring

Evaluation of the firms system of quality control to provide

reasonable assurance that it is designed appropriately and operating effectively.

o

negative confirmation request The negative form of accounts receivable confirmation asks the client's customer to respond only if the customer disagrees with the balance determined by the client. The positive form asks the customer to respond whether the customer agrees or disagrees with the client's receivable

balance. The negative form is used when controls over receivables are strong and accounts receivable consists of many accounts with small balances. The positive form is used when controls are weak or there are fewer, but larger, accounts.

nonsampling risk is audit risk not due to sampling. An auditor may apply a procedure to all transactions or balances and fail to detect a material misstatement. Nonsampling risk includes the possibility of selecting audit procedures that are not appropriate to achieve a specific objective. For example, confirming recorded receivables cannot reveal unrecorded receivables. Nonsampling risk can be reduced to a negligible level through adequate planning and supervision.

objectivity The internal auditors' objectivity depends on the organizational status of the internal audit function, whether the internal auditor has direct access and reports regularly to the board, the audit committee, or owner-manager, and who oversees internal auditor employment decisions.

obligations Assertions about obligations deal with whether liabilities are obligations of the entity at a given date. For example, management asserts that amounts capitalized for leases in the balance sheet represent the cost of the entity's rights to leased property and that the corresponding lease liability represents an obligation of the entity.

other information Financial and nonfinancial information (other than the financial statements and the auditor's report) included in a document containing audited financial statements and the auditor's report thereon, excluding required supplementary information.

overall review The objective of the overall review stage of the audit is to assess conclusions reached, and evaluate the overall financial statement presentation.

The overall review includes reading the financial statements and notes and considering adequacy of evidence gathered in response to unusual or unexpected balances. Results of an overall review may indicate the need for additional evidence.
o

parallel processing is the simultaneous performance of multiple operations, usually in reference to computer systems.

parallel simulation testing is the simultaneous performance of multiple operations. It provides evidence of the validity of processing if the second processing system yields the same results as the first. Auditors use their own generalized audit software to process the same data as was processed by the clients software. If the output of the audit software is the same as the output of the clients software that is evidence that the clients software is performing properly.

personal financial statements of individuals present assets and liabilities at estimated current value on an individual's balance sheet (statement of financial condition). A statement of changes in net worth presents major changes in net worth during a period. The accrual basis is used for assets and liabilities, which are presented in order of liquidity and maturity, without classification as to current and noncurrent. The cash value of life insurance less the amount of loans against it is an asset. Deferred income tax on the difference between the income tax basis and estimated current values is presented between liabilities and equity.

plan Audit planning is developing an overall strategy for conduct and scope of the audit. The nature, extent, and timing of planning vary with size and complexity of the entity, experience with the entity, and knowledge of the business. In planning the audit, the auditor considers the entity's business and its industry, its accounting policies and procedures, methods used to process

accounting information, the planned assessed level of control risk, and the auditor's preliminary judgment about audit materiality.
o

questionnaire An internal control questionnaire is a list of questions about the internal control system to be answered (with answers such as yes, no, or not applicable) during audit fieldwork. The questionnaire is part of the documentation of the auditor's understanding of the client's internal controls.

quick ratio Quick assets divided by current liabilities. Quick assets are current assets less inventories and prepaid expenses.

random sample (random-number sampling) Identical probability of each population item being selected for a sample. Also, the use of random numbers to select a random sample from a population.

ratio The relation between two quantities expressed as the quotient of one divided by the other. The ratio of 8 to 2 is written 8/2 and equals four. Financial statement ratios are used as analytical procedures in audits.

ratio estimation In audit sampling a ratio of the proportion of errors in the sample applied to the population value to estimate total error.

reasonable assurance (in audit report) An auditor works within economic limits. The audit opinion, to be economically useful, must be formed in a reasonable time and at reasonable cost. The auditor must decide, exercising professional judgment, whether evidence available within limits of time and cost is sufficient to justify an opinion.

reasonable assurance (in internal control) An internal control, no matter how well designed and operated, cannot guarantee that an entitys objectives will be met because of inherent limitations in all internal control systems.

reaudit When an auditor is asked to audit and report on financial statements that have been previously audited and reported on.

reliable (reliability) Different audit evidence provides different degrees of assurance to the auditor. When evidence can be obtained from independent sources outside an entity it provides greater assurance of reliability for an independent audit than that secured solely in the entity. More effective internal controls provide assurance about reliability of the accounting data and financial statements. The independent auditor's direct personal knowledge, from physical examination, observation, computation, and inspection, is more persuasive than information obtained indirectly.

sampling risk The possibility that conclusions drawn from the sample may not represent correct conclusions for the entire population.

secured transaction Right to repossess goods as security for payment of a debt. service auditor The auditor of an organization that provides services such as data processing or pension trust administration to other organizations (the users). Auditors of the users (user auditors) rely on a report from the service auditor about controls in the service organization that apply to financial statements of the user organization they are auditing.

third parties are all persons, including those charged with governance, except for members of management.

tick marks in audit work papers are footnotes represented by a symbol instead of by a number. They indicate procedures that have been carried out on specific items in the work papers.

timing of audit testing means when the procedure is performed. If you perform a test of balances procedure before year end there is a risk that internal controls are inadequate to provide assurance up through the balance sheet date. There is less risk if you do the procedure as of the balance sheet date.

tolerable deviation rate - the maximum rate of deviation from an internal control that will allow the auditor to place the planned reliance on that control.

tolerable misstatement - When planning a sample for a substantive test of details, the auditor considers how much monetary misstatement may exist without causing the financial statements to be materially misstated. This maximum misstatement is the tolerable misstatement for the sample.

treasurer - The officer who controls the entity's funds. The treasurer normally signs checks and is responsible for cash management.

treasury stock - a stock of the corporation that has been issued and later reacquired. It is not an asset. It is a reduction of stockholders' equity. Treasury stock can be recorded at either its cost or its par value.

trend analysis - An analysis of the change in something over time. Analytical procedures, which compare financial statement ratios of different years, are an example of trend analysis.

trial balance - A statement of open debit and credit accounts in a ledger to test their equality.

turnover - Inventory turnover is a measure of the time from receipt of inventory to its sale. It is found by dividing cost of sales by average inventory. Receivables turnover is a measure of the time it takes to collect receivables. It is found by

dividing net credit sales by average net receivables. Employee turnover is the rate at which new employees replace old employees.
o

unconditional requirements apply in all cases. Quality control standards use the words must or is required for an unconditional requirement.

uncorrected misstatements these are misstatements that the auditor has accumulated during the audit and that have not been corrected.

update (updated) - If an auditor notices events that affect financial statements on which an audit report has been issued, they are considered when updating the report on those statements. If those statements are changed, the updated report says they have been restated and expresses the appropriate opinion. If an updated opinion differs from the previous opinion, an explanatory paragraph preceding the opinion paragraph explains that the report has been updated and discloses the date and type of opinion previously expressed, and events that caused the revision.

user auditor - A service auditor is the auditor of an organization that provides services such as data processing or pension trust administration to other organizations (the users). Auditors of the users (user auditors) rely on a report from the service auditor about controls in the service organization that apply to financial statements of the user organization they are auditing.

validity check - Software control over input of data to a computer system. Data is compared with the type of data properly included in each input field, e.g., only letters in a name field.

valuation - An assertion made by management that each asset and liability is recorded at an appropriate carrying value

value-added

network

telecommunications

network

providing

communication facilities, which enhance basic telecommunications services. They add value by passing, storing and converting messages. Also known as service providers and EDI service providers. Operated by a clearing house, an organization that provides message/file collection, routing and distribution service on behalf of other organizations.
o

variable sampling - The characteristic tested has many possible values (such as dollar value of inventory).

variance - A statistical measure of dispersion in a population. The variance is the square of the standard deviation. The standard deviation equals the square root of the arithmetic mean of the squares of deviations from the arithmetic mean.

vendors - provide goods or services to an entity. Also called suppliers. verify (verification) - Prove accuracy of numbers or existence of assets. working papers (written audit documentation) Records kept by the auditor of procedures applied, tests performed, information obtained, and pertinent conclusions in the engagement.

10.2. THE

IMPORTANCE

OF

ENGLISH

KNOWLEDGE

IN

AUDIT.

AN

INTERDISCIPLINARY APPROACH Financial auditors scrutinize the financial processes of businesses through a set of analytical activities. They review financial records with the aim to identify any fraudulent practices or incompetent processes. Career prospects are very bright for auditors who have a suitable certification. Thus it is very clear that auditors have an important role to play. Auditing is done in companies to ensure that they adhere to official guidelines. Audits can be of two types, the external audit and the internal audit. Generally the external audits are

conducted by public accounting firms or individual certified accountant or chartered accountant. In this case the financial information of the company is cross checked by the external auditors. On the other hand internal audits are conducted by the accounting staff of the company. Generally in an audit course the auditors are taught ways whereby they can use the auditor's manual and learn the finer points and specific aspects and angles from which to check the financial statements of the company. By undergoing an audit training course, you become familiar with audit guidelines, audit approach, concepts and basic terminology, documentation, planning, interviewing, analysing data, communicate and much more. You can register in online for these courses or join classroom training depending on your convenience. Internal audit training course is the method of developing the skills and ways which are used by the companies to train employees in the finance department to conduct the internal audits properly. It is very important in the first place to conduct internal audits because if there is any discrepancy it can be found out before the external auditors look into the matter. If the internal auditors are trained well they are in a position to point out the discrepancies and flaws which may exist in the financial statements of the organisation. Once the auditors are done with the entire process of internal audit, they can always suggest some kind of changes in the financial statements or reviews. The suggestion of the auditors may improve the auditing of the organisation the next time. Audits bring out aspects which may not have been noticed, were hidden (intentionally or unintentionally), discrepancies and important points which could influence the overall costing, budgeting and profitability of the company. As far as the capabilities of the auditors are concerned it is important that they have certification or licenses to conduct the internal audit of an organisation. In most of the cases it is seen that the auditors who have the required degree along with some practical hands-on experience have the expertise to conduct audits even for bigger firms. An audit training course should include a number of things. In the first place it should have education, cross training, job shadowing, certification incentive, placement facilities and of course a challenging environment. When all these are present it is possible that an auditor will become experienced and proficient at his job in the long

run. Among these, the knowledge of English is essential, as it directly points to: experience exchanges with international foreign experts, the proficient approach of the technical literature in the field, the consultation of very reliable sources of information. Generally it has been seen that an in-house auditor course has a more professional approach than the normal audit course. This is because these in-house courses are directed to those who already have an idea of auditing. The courses are designed such that the auditors can brush their skills and they also come to know of the latest developments. On the other hand it can be said that training which is conducted by the auditors within the organisation is part of the management training process. This is because most of the auditors do not remain in the audit-shop for long, instead they move up to the managerial level.

REFERENCES: 1. Cook, G. (1999). Academic Writing, OUP;

2. 3. 4.

Emerson, Paul (2008). Business English. Macmillan; Ellison, Taylor Pat (2007).Business English for the 21st Century, Prentice Hall; Evans, David (2003). Decisionmaker. Cambridge: Cambridge University Press; 5. Hartley, P, Bruckmann, C (2007). Business Communication, Routledge; 6. Hollinger, Alexander (2010). Written Communication in Business English, Ed. Universitara, Bucuresti 7. MacKenzie, Ian (1995). Financial English, LTP;

8. 9.

Naylor, H., Hagger, S. (1992). Paths to Proficiency, Longman Group UK Ltd; Neagu, Mariana; Daniela arpe (1999). Dicionar explicativ englez - romn de termeni Schibsbye, Knud (1991). A Modern English Grammar. Oxford: Oxford University Press; Turcu, Fulvia; Violeta Nstsescu (2000). Limba englez pentru ntreprinztori i

economici. Galai: Editura Alma;

10. 11.

oameni de afaceri. Bucuresti: Editura Percomex.