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Date: 2019-06-20 Page is: DBtxt001.php L0700-CC-AUDIT


CORE CONCEPTS
AUDIT

I trained as a Chartered Accountant in the 1960s. I was articled to Brian Maynard, a Partner at Cooper Brothers & Co in London. UK which was in the process of combining with Lybrand, Ross Bros. and Montgomery from Phildelphia USA. At the time the accounting firms were partnerships with all the responsibility and risk that goes along with operating as a partnership. In the UK, accountancy was a highly respected profession with very high ethical standards.
Some years later one of my contemporaries who had been with me at Cambridge, and trained with me at CB&Co, and later had become a senior partner at Cooper and Lybrands observed to me that accountancy was no longer a profession, but it was a business. This is sad ... but also dangerous. That was in 1991. Since then the loss of professionalism in accountancy and in the broader business community has only become worse.
It is my understanding that in the early days of the agricultural revolution and then the industrial revolution, the business community was prone to exaggerating the financial opportunity to potential investors. The misrepresentation was blatant and eventually people in power determined that the lying should be put to an end by having financial statements independently audited. This idea is ongoing, and companies obtaining finance from the public are still required to submit themselves to audit.
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According to Wikipedia an audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law.
Audit
Wikipedia information on audit
'https://en.wikipedia.org/wiki/Financial_audit'
Open exteral link
Financial Audit
Wikipedia information on financial audit
'https://en.wikipedia.org/wiki/Financial_audit'
Open exteral link
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How good is the audit function?
NYTimes.com Article from 2003: U.S. Charges Ernst & Young Ex-Partner in Audit Case
Open file 3109
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Issue
Audit
Basic observation
Audit is a process that confirms that an accounting system is working right and the reports are correct.
Prevailing response
Audit does little more than to provide a check on the accountants, the accounting system, and the financial reporting. It is a limited exercise, and totally unsuited to be used as a substitute for good accounting. Few of the senior people in the relief and development sector seem to understand an audit cannot substitute for good basic systems and analytical accounting. Audit merely confirms that leadership failed to take accounting seriously and did not do its job.
A better response
The effort being used on audit after the fact should be put into improving the underlying accounting and the routine reporting, both internal and external. Audit should simply ascertain and then certify that everything is OK. If the audit cannot do that, then all responsible leadership within the project, the implementing organizations and the disbursing institutions should be called to account.




The text being discussed is available at


TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative.
It has been funded by family and friends plus donations from well wishers who understand
the importance of accountability and getting the management metrics right.
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