Value Added Tax

The Ukrainian value added tax structure has been changing comparatively little since the tax was adopted. Value added fax is a tax on the final consumption of goods and services in the home market. But according to the Tax Law it is levied at every stage of production and distribution. The present standard tax rate is 20 per cent. It's too high as compared with highly developed. A number of producers and suppliers are periodically exempted from VAT.

One of the features distinguishing Ukrainian VAT is the extent to which the zero rate of tax applies. A lot of consumer expenditures in Ukraine are spent on supplies which are exempt from the tax, or zero rated. Some items of particular importance to the budgets of poor families such as agricultural products, children's clothing and footwear, some foodstuffs are zero-rated or have a reduced rate. There is a reduced tax rate for domestic supplies of fuel and power.

As a result of fiscal frontiers CIS member countries are anxious to establish a floor to the standard rate. This would avoid a situation where countries compete to have a lower VAT rate than their neighbours.

The administrative system of VAT control in Ukraine is based on central administration supported by local authorities. The control is needed to be sure that taxpayers keep their accounts properly and declare the correct amount of tax. Tax Administration encourages taxpayers to pay on time, and where necessary, recovers debts.

6. Speak on the topics: Taxation System in Ukraine; Value Added Tax.

Lesson 12

1. Read and translate the text:

Auditing

Auditing is an accounting function that involves the review and evaluation of financial records and financial position of a company. Audits are performed by highly qualified accountants (auditors) ordered by the management of the company or by some state authorities (audit and control). Not so many years ago audit suggested that a company had financial difficulties or some irregularities in the records. At present, audits are a normal and regular part of business practice.

There are two types of auditing: internal and independent.

Internal audit is a system of internal control which provides accounting controls against errors and misappropriations. Many companies employ their own accountants to maintain an internal audit. They continuously review operating procedures and financial records and report to management on the current state of the company's fiscal affairs. They check the accounting records in regard to completeness and accuracy, making sure that all irregularities are corrected.

Independent auditing is done by certified accountants (CPA - certified public accountant - in the USA) who are not employees of the organization whose books they examine. Independent auditors review the business's operating activities; they examine financial statements, the accounting records and other business papers to determine the accuracy and completeness of the records. It is called fairness in accounting terminology, that is, if the accounting process has been done according to accounting principles, procedures and rules at that organization. The accountant's judgment or opinion on the fairness of the records is written in a document sent to the client upon completion of the audit. It consists of a letter addressed to the client that involves a scope paragraph (list of documents that he has examined, and the standards that have been used for the audit), and an opinion paragraph (the auditor's conclusions).

Auditors can help the business set up a reliable accounting system; they can also discover whether nonexistent transactions have been entered on the books. Even in a small business mistakes in the books of accounts can lead to a business failure.

And finally, Britain is a major financial centre, housing some of the world's leading banking, insurance, securities, shipping, commodities, futures and other financial services and markets.

Direct control on pay, prices, foreign exchange, dividend payments and commercial credit are under strict scrutiny of the Government.

Commentary:

financial records – фінансові записи (операції)

financial position – фінансове становище

audit – аудит, перевірка, ревізія

to audit – проводити аудит

auditing – аудит (процес)

auditor – аудитор, ревізор

internal audit – внутрішній аудит

independent (external) audit – незалежний аудит

to maintain an audit – проводити аудит

misappropriations – незаконне присвоєння, розтрата

in regard to – щодо

all irregularities are corrected – усі помилки виправлені

a scope paragraph – констатуючий параграф

an opinion paragraph – висновки

nonexistent transactions – неіснуючі операції

2. Say what you have learnt:

1. auditing as an accounting function;

2. specialists who are allowed to perform audits;

3. types of auditing;

4. the system of internal control at businesses and organizations;

5. the tasks independent auditors solve;

6. the way how to determine the accuracy and completeness of the records;

7. a scope and an opinion paragraphs.

3. Find the following English equivalents in the text, translate sentences containing them into Ukrainian:

Незалежний аудит; бухгалтер, який пройшов сертифікацію, точність та ретельність; достовірність, автентичність інформації; компетентність аудитора; оцінка фінансового становища підприємства; відповідність правилам бухобліку; платіжна відомість; параграф-висновок; проводити огляд.

4. Ask and answer the following questions to make a discussion:

• What does the auditing function of accounting involve?

• How has the attitude toward auditing changed in modern times?

• What kind of system for checking on operating and recording transactions is maintained by many organizations?

• What types of audit do we distinguish?

• What weakness exists in the internal auditing system? How can management overcome these problems?

• Who can carry out an independent audit?

• What does a complete examination consist of?

• Is auditing useful to a business?

5. Speak on the topic: Audit and Control.