ENGLISH FOR FINANCE accounting and auditing from the general to the specific

There are seven main types of Accounting including Financial Accounting, CostAccounting, Managerial Accounting, Accounting Information Systems, TaxAccounting, Forensic Accounting, Fiduci

ENGLISH FOR FINANCE

ACCOUNTING AND AUDITING

Class

18131BE218131BE318131BE218131BE3

Name

Nguyễn Hoài Nam

Thái Hồ Thảo Ngân

Võ Lan Như

Lý Trần Thanh Thương

ACCOUNTING AND AUDITING LECTURER: ĐẶNG THỊ LOAN

Class: ENFI330437 Group: 08

GROUP MEMBERS

TABLE OF CONTENTS Page

Introduction 1

Chapter 1: Accounting and Auditing from the general to the specific 2

1.1 An overview of Accounting and Auditing 2

1.1.1 Basic ideas about Accounting 2

1.1.2 Basic ideas about Auditing 2

1.2 The details of Accounting and Auditing 2

1.2.1 Accounting in detail 2

1.2.1.1 Financial Accounting 2

1.2.1.2 Managerial Accounting 3

No NAME CLASS ID

1 Nguyễn Hoài Nam 18131BE2 18131069

2 Thái Hồ Thảo Ngân 18131BE3 18131070

3 Võ Lan Như 18131BE2 18131090

4 Lý Trần Thanh Thương 18131BE3 18131117

1.2.1.4 Accounting Information System 3

1.2.1.5 Tax Accounting 3

1.2.1.6 Forensic Accounting 4

1.2.1.7 Fiduciary Accounting 4

1.2.2 Auditing in detail 4

1.2.2.1 Internal Auditing 4

1.2.2.2 External Auditing 4

Chapter 2: The process of Accounting 5

2.1 Identifying and analyzing Business Transactions 5

2.2 Recording in the Journals 5

2.3 Transferring all transactions from the Journals to the General Ledger 5

2.4 Preparing the unadjusted Trial Balance 6

2.5 Recording adjusting entries 6

2.6 Preparing the Adjusted Trial Balance 6

2.7 Preparing Financial Statements 6

2.8 Recording Closing Entries 7

2.9 Preparing a Closing Trial Balance 7

2.10 Recording Reversing Entries 7

Chapter 3: The process of Auditing 8

3.1 Notification 8

3.2 Planning Process 8

3.3 Initial Meeting 9

3.4 Fieldwork 9

3.5 Communication 9

3.6 Draft Audit 9

3.7 Management Response 9

3.8 Exit Meeting 10

3.9 Distribution of Audit Report 10

3.10 Feedback 10

Chapter 4: The relationship between Accounting and Auditing 11

4.2 Differences 11 Conclusion 14

INTRODUCTION Accounting and Auditing are essential aspects of a business They are known as

“Language of business” because they predict and measure the upcoming profit and loss

of a company Moreover, Accounting and Auditing give details of financialinformation to the managers and accounting professionals to make appropriate businessdecisions

There are seven main types of Accounting including Financial Accounting, CostAccounting, Managerial Accounting, Accounting Information Systems, TaxAccounting, Forensic Accounting, Fiduciary Accounting Meanwhile, Auditing has twocommon types which are Internal Auditing and External Auditing

Generally, all types of Accounting and Auditing play vital roles in every singlecompany nowadays They assist in planning Financial Stability, evaluate BusinessPerformance, and discover and prevent Financial Fraud, which is a critical factor for thedevelopment of an organization and surviving in competitive business environments.Thus, we have learned about Accounting and Auditing to cultivate the businessskills and information

CHAPTER 1:

ACCOUNTING AND AUDITING FROM THE GENERAL TO THE SPECIFIC 1.1 An overview of Accounting and Auditing

1.1.1 Basic ideas about Accounting

Accounting is the significant language of business, which refers to the method ofrecording, classifying, summarizing, reviewing and presenting financial transactions,documents, reports, profitability and financial status of an individual or company Accounting is performed by the members of a company continuously Accounting

is divided into different branches including Financial Accounting, Cost Accounting,Managerial Accounting (known as Management Accounting), Accounting InformationSystems, Tax Accounting, Forensic Accounting, Fiduciary Accounting

1.1.2 Basic ideas about Auditing

Auditing refers to the process of analyzing a company or organization's financialreports or statements Therefore, it is compulsory for all separate legal entities Auditing

is performed after the final preparation of the financial statements and accounts

Auditing includes carrying out an examination and legal audit of the financialstatements and providing an accurate and neutral opinion on whether the financialstatements and reports are a true and fair representation of the firm's present financialsituation

Auditing has two main categories: Internal Auditing and External Auditing InternalAuditing is managed by an internal auditor who is appointed by the management or anemployee of the company External Auditing is conducted by an external auditor who isappointed by the shareholders’ vote

1.2 The details of Accounting and Auditing 1.2.1 Accounting in detail

1.2.1.1 Financial Accounting

Financial Accounting involves recording and categorizing transactions for business,

so that internal management and external stakeholders, such as suppliers, investors andowners, are able to have an overview of the next financial year

It also involves making financial statements based on these transactions According

to the Generally Accepting Accounting Principles (GAAP), all financial statementsincluding balance sheet, income statement, cash flow statement and the statement ofretained earnings must be prepared

Financial Accounting is carried out to give external parties information about thecompany’s performance, and it is not for internal employees, to analyze and makefinancial decisions.

1.2.1.2 Managerial Accounting

Also known as Management Accounting, this type of accounting providesinformation about a company’s operations to managers The main task of ManagerialAccounting is to provide all the data that managers need to make necessary decisionsabout a business’s operations

Managerial Account is focused on the internal decision making, unlike FinancialAccounting, which is mainly concentrated on the reporting of the company’s financialtransactions to external users

1.2.1.3 Cost Accounting

Cost Accounting is considered as a type of managerial accounting It is popularlyoccurring in the manufacturing industry which has various resources and costs tomanage

Cost Accounting is related to recording and analyzing production costs byevaluating the company’s fixed and variable costs

1.2.1.4 Accounting Information System

Known as AIS for short, the Accounting Information System includes collecting,storing and processing financial and accounting data which is used by internal users toreport information to external users This type of accounting is generally a computer-based method to keep track of accounting activity in combining with informationtechnology resources

This type is the harmonious combination of modern information technologyresources and traditional accounting practices, such as the use of Generally AcceptedAccounting Principles (GAAP)

1.2.1.5 Tax Accounting

Tax Accounting is a structure of accounting methods which is focused on taxes TaxAccounting is ruled by Internal Revenue Code (IRC), as a result, companies andindividuals must follow when preparing tax returns Internal Revenue Service (IRS)adjusts the Tax Accounting to ensure that all taxpayers adhere to all associated tax laws.Tax Accounting helps businesses figure out all categories of taxes and find the way

to reduce legally their amount of taxes they are owning Tax Accounting also inspectstax-related business decisions and other kinds of issues related to taxes

Forensic Accounting is used to support litigation and investigate crimes.

It is utilized in litigation when a company needs the quantification of damagewhich assists in resolving argument by court decisions

It is also used to discover whether a crime happened and measure the possibility ofcriminal intent These crimes include employee theft, identity robbery, securitiestrickery, insurance fraud, or distortion of financial statement information

1.2.1.7 Fiduciary Accounting

Fiduciary Accounting consists of estate accounting, trust accounting andreceivership The executors of Fiduciary Accounting are required to keep detailedfinancial records of a deceased person’s assets The Fiduciary Accountant controls most

of accounts or activities related to the management and protection of property

1.2.2 Auditing in detail 1.2.2.1 Internal auditing

Internal Auditing evaluates how a business splits accounting duties, who isauthorized to do what tasks, and what procedures and policies are applied InternalAuditing helps a business avoid fraud, mismanagement and waste, or identify andmanage any types of potential weaknesses in its policies or procedures

1.2.2.2 External auditing

In External Auditing, an independent third party reviews the financial statements of

a company to make sure the company presented them correctly and obeyed the GAAP.Due to the requirement of laws, management, and directors, shareholders, as well

as other requirements, external auditors are normally hired by organizations to audittheir financial statement annually

Identified transactions and events are then analyzed to determine the affectedaccounts and the amount to be noted down.

The first step consists of the process of preparing business documents or sourcedocuments A business document is considered as the fundamental thing in recording atransaction

2.2 Recording in the Journals

Journals are also known as Books of Original Entry

Transactions are recorded in a journal, which can be in the form of paper orelectronic books The double-entry bookkeeping system is used to record all businesstransactions These economic actions are recorded in journal entries includes at leasttwo accounts: one debit (abbreviated to “dr”) and one credit (abbreviated to “cr”)

To make the recording process simple, some special journals are often utilized torecord transactions that happen recurrently like purchases, cash receipts, sales, and cashdisbursements Any kinds of transactions that cannot be recorded in special journalswill be recorded in a general book

Every economic action or transaction has to be recorded in chronological order and

as they happen

2.3 Transferring all transactions from the Journals to the General Ledger

Also considered as Books of Final Entry, the ledger collects all accounts that showthe changes made to each account as an outcome of past economic actions, and theircurrent balances

After posting all transactions to the general ledger, the balances of each account cannow be verified

For example, all journal entry debits and credits made to Sale when selling productswould be moved to the Sale account in the ledger We can measure the increases andreduces in sales; from that, the ending balance of Sale can be determined

2.4 Preparing the unadjusted Trial Balance

A trial balance is prepared to calculate whether the debits and credits are equal Allaccount balances are derived from the ledger and organized in one report Afterwards,all debit balances and all credit balances are added It will be right when total debits areequal to total credits

When any mistakes are discovered, rectifying entries are made to correct them orchange their effect However, noting that the objective of a trial balance is to test theequality of total debits and total credits and not to make sure that the accounting recordsare right

Some errors could be made even if total debits are equal to total credits, such asdouble posting or failure to record a business action

2.5 Recording adjusting entries

Adjusting entries are made as an application of the additional basis of accounting Atthe end of the accounting period, some expenses or even losses may have been incurredbut not yet entered in the journals Some income or profits may have been gained butnot recorded in the books

Adjusting entries are prepared to make accounts up to date before they aresummarized in the financial statement

Adjusting entries are made for accrual of profits, accrual of losses, bad debts,deferrals (using income method or liability method), prepayments (using asset method

or expense method), depreciation, sale return and allowances

2.6 Preparing the Adjusted Trial Balance

An adjusted trial balance consists of all the account titles and balances of the generalledger which is made after the adjusting entries for an accounting process have beenrecorded to the accounts It is considered an internal document and is still not afinancial statement

This is to determine the equality of the total debits and the total credits after adjustingentries are made It is used to create the income statement and balance sheet andprovide adequate information for preparing the cash flow statement

2.7 Preparing Financial Statements

When the accounts are already updated and the equality between the total debits andtotal credits have been verified, the financial statements can now be prepared Thefinancial statements are the last results of an accounting system

A full set of financial statements concludes: (1) Statement of Comprehensive Income

Equity, (3) Statement of Financial Position or Balance Sheet, (4) Statement of CashFlows, and (5) Notes to Financial Statements.

2.8 Recording Closing Entries

At the end of an accounting period, closing entries are made to transfer informationfrom the temporary accounts to the permanent balance sheet or income statementaccounts

Temporary or nominal accounts can be income, expense, and withdrawal accounts.These items are tested in the period

However, noting that closing entries are used only for temporary accounts Real orpermanent accounts, such as balance sheet accounts, are regarded as not closedaccounts

2.9 Preparing a Closing Trial Balance

In the accounting process, the last stage is to make a post-closing trial balance It isprepared to measure the equality of debits and credits after making the closing entries.Since temporary accounts are already closed at this stage, the post-closing trial balancejust only consists of real accounts

2.10 Recording Reversing Entries (An optional step at the beginning of a new accounting period)

Reversing Entries are not a compulsory step of the accounting process A reversingjournal entry is made on the first day of the new accounting cycle in order not to doublecalculate the amount when the economic action happens in the next process

an initial meeting the auditors would like to schedule with the company’s leaders.Besides, it is used to track statuses, assignments, due dates, and follow-ups for allinternal and external items to guarantee that they are handled punctually Notificationsare created to department managers to assign and resolve findings.

We usually inform the department head at least two weeks in advance Theinformation requests and questionnaire are often due back to us within two weeks.The notification will also point out what documents the auditor wants to examine.For a corporation, this can consist of articles of incorporation, the recorded minutes ofany board meetings, an organizational chart, correspondence, sales records and more

3.2 Planning Process

When the notification is committed to the auditor, they will take some time toprepare the audit This step plays a vital role because it describes the auditor'sresponsibilities for properly planning the audit

Founding the general audit strategy for the engagement and developing an auditproject consisted in planning the process, which includes planned risk assessmentprocedures and planned responses to the risks of material misstatement

Before meeting with the organizational leadership, the plan must be done Thismeeting is held in order to craft the conformable strategy for that meeting and thefieldwork that follows It is also necessary to identify the key areas of inquiry andconcern and the specific information which they expect to examine in order to analyzethose areas This also gives the company time to assemble the requested documents

3.3 Initial Meeting

The planning stage usually predisposes the senior management of the company andthe auditors to an initial meeting Administrative staff may also be present Themeeting's function is to bring the opportunity to the auditor to explain the process, aswell as to give the organization a chance to press out any practical, strategic orscheduling concerns they may have