4. Listen again and answer the following questions.

1) From what is said and implied in the text, what method of control of auditing exists in Britain now?

2) Is this system of control considered entirely satisfactory?

3) Who are the 'stakeholders'?

4) What is the auditor's role in relation to these stakeholders?

5) What is the 'principal/agent' problem in relation to auditing caused by? (choose from the following)

a. auditors working for the 'stakeholders';

b. auditors owing their main loyalty to the company managers;

c. managers always wanting their company results to appear favourable;

d. auditors having responsibility to people other than those who use them.

6) In Britain, which of the following steps could the user of an auditor's report take if he/she felt the report was dishonest? (More than one answer is possible.)

a. report the auditor to the auditor's professional association;

b. get the police to prosecute the auditing company;

3. take the auditing company to court and get monetary compensation;

4. tell newspapers about the auditing company.

7) In the opinion of the authors, how effective are the actions which can be taken against dishonest auditors?

8) What is the 'insurance policy' for those who make use of company reports? How good is the 'insurance policy', according to the text?

9) Various proposals for improving auditing standards are discussed in the text. What are their disadvantages? Match the proposals on the left with their disadvantages according to the text.

Proposal	Disadvantage of proposal
Lessen the amount of competition for audit work. Forbid auditors to do other work for companies that they audit. Require companies' auditors to change from time to time.	(a) Produces problems of continuity and quality maintenance. (b) Restrictive practices do not normally raise standards. (c) Audit firms have managed to avoid such a regulation.

10) What do the authors of the text think in general of these proposals? Why do they think so?

SPEAKING

1. Read the dialogues below and discuss what the setting of the situation under discussion is and what the job functions of the participants are; if you would or wouldn’t like to have such sort of work. Give your reasons.

BUCKHURST: You usually go to the bank on Fridays to cash staff cheques, don't you?

KENNET: Es, Mr. Buckhurst.

BUCKHURST: Can you remember any occasion in the last few months when you have not gone?

KENNET: Er... I was away for my holidays in the summer. I think that was the only time I didn't go.

BUCKHURST: Yes, that was in August, wasn't it? Well, this figure he's querying was in October… and there was another occasion in... in... er... June.

KENNET: What occasion do you mean? What are you referring to?

BUCKHURST: The auditor has found that on these two occasions more was drawn out from the bank than was paid in. Can you explain the reason for that?

KENNET: Er... I'm sure I don't know why the amounts should be different. They should be exactly the same. Can I look at the bank statements?

BUCKHURST: Certainly. Here they are.

KENNET: Thank you.

BUCKHURST: And here are the two paying-in vouchers for the two dates; both in your handwriting, I think?

KENNET: Yes... but I don't understand...

BUCKHURST: The withdrawal on the bank statement here must be the cash for the staff, because on both days it is the only amount drawn. You don't think you could somehow have lost one of the cheques you were paying in?

KENNET: Look, I'm sorry, Mr. Buckhurst. I can explain it. I really was going to pay it back later. You see I... my mother was ill and...

BUCKHURST: Why didn't you come and ask me for help if you were in trouble? Or you could have seen the Personnel Manager. We might have arranged for you to draw your pay in advance. But this... this is stealing.

KENNET: I didn't mean to steal it. I was going to pay it back. I intended to pay it back. I didn't mean to be dishonest, really 1 didn't...

(Later.)

BUCKHURST: Well, Mr.Brent, when do you think you'll be finished?

BRENT: Oh, I think I should be through by the end of the month. But now I've seen the extent of the work, I'll bring in two of the others to help me.

BUCKHURST: No more problems so far?

BRENT: No, I don't think so. It all seems to be in order.

BUCKHURST: Thanks. By the way, that clerk was responsible.

BRENT: Oh dear! Poor fellow. You'll have to dismiss him, I suppose.

BUCKHURST: Yes, we may have to. It's a pity. He works hard and he's been satisfactory in every way, apart from this.

BRENT: Well, I'm sorry to have been the cause of such an unhappy discovery.

BUCKHURST: We're very glad you did discover it. You have probably saved the company from an even bigger loss.

2. Make up your own dialogue on a similar situation.

WRITING

1. Write the full names of the organizations and standards. Some words have been given to help you.

1) FRC – Financial .......... .......... .

2) FASB – Financial .......... ........... Board

3) IOSCO – International Organization of .......... ........... ........... .

4) SEC – .......... and .......... Commission

5) GAAP – .......... ......... .......... Principles.

6) IFRS – International Financial .......... .......... .

2. Write an essay of about 250 words on the topic “Auditing”, defining the role of auditing in modern business practice and giving your opinion on the following questions:

● How could the work of auditors be made more effective?

● Should the government pay auditors, not the companies they audit?

● Should auditors be civil servants?

● How a questioning of the present role of the auditor may lead to changes in auditing in the future?

While writing make good use of logical connectors from the section “Focus on Functions”.