I NFLATION A CCOUNTING

1. Current Purchasing Power ( CPP / GPP ) Method Under this method all items in financial statement are converted in terms of current purchasing power – general price index

Monetary assets like Debtors, creditors, cash, bank balances are not restated but gains or loss on holding are determined and adjusted to Profit & loss A/c Non monetary assets – Equity, Fixed assets, investments, inventories are restated at the current purchasing power and the difference in Balance Sheet is treated as Reserves.

Ascertain the monetary result of the following at the end of Bank Debtors Creditors Price index ( Average 160 )

Compute the net monetary result as on Cash Debtors Creditors Loan taken

Current cost accounting method (CCA method ) - Value to the business

Current cost Profit & loss A/c should show current cost operating profit or loss – this is done by making the following adjustments - Adjustment of stocks - Adjustment of depreciation - Monetary working capital adjustment

Valuation of Balance Sheet items - Fixed assets, investments etc are valued at net current replacement cost - Monetary assets are not restated but a statement is prepared depicting the gain or loss on holding monetary assets however no adjustment is made for the same in P/L A/c

Emerging trends in accounting Need for global harmonisation - globalisation of business - movement of funds across the globe - Strategic business alliances

Efforts towards global harmonisation International Accounting Standards Board ( IASB) Institute of Chartered Accountants of India

Emerging Dimensions in Voluntary Financial reporting 1. Value reporting 2. Human Resource Accounting 3. Brand valuation 4. Economic Value Added Statement

AUDITING Do managers need to know auditing ? “ Whenever we need to know what is happening,it is best to ask those who is responsible before asking outsiders” Risk management, internal controls, compliance requirements by various government agencies and regulators. Auditing as a tool for above Managers outlook towards auditing Alignment of auditing as a tool with managers functions i.e responding to threats and challenges. Credibility gap between auditors and managers.

Can the owners believe the report prepared by managers The report may :  contain errors  not disclose fraud  be inadvertently misleading  be deliberately misleading  fail to disclose relevant information  fail to conform to regulations

An auditor gives assurance to the users of financial statements that :  It is prepared using the generally accepted accounting principles  The provisions of Companies Act w.r.t the same has been adhered to  The provisions of Income Tax Act has been looked into  The statements are prepared in accordance with the Accounting Standards issued by ICAI

Types of audit 1. Statutory audit 2. Internal audit 3. Cost audit 4. Management audit 5. Operational audit 6. Marketing audit – Strategy / organization / System / productivity 7. Propriety audits 8. Balance Sheet Audit 9. Tax Audit 10. Investigations

Special audits Energy audits Environment audit HR audit Social audit

ISO Audit ISO 9000 – Quality Management System ISO Certifies the procedures covering the key processes in the business ISO – Environmental management standards ISO – Guidelines for quality management systems and environmental management systems audit BIS – Bureau of Indian Standards

SA ( Social Accountability ) 8000 International Standard for improving working conditions  Child labour  Health and Safety  Freedom of Association and Right to collective Bargaining  Discrimination  Working hours  Discipline  Management and compensation

Sarbanes Oxley Act 2002 ( SOX ) US Govt. has set up a quasi public agency for overseeing, regulating, inspection and disciplining accounting firms in their roles a auditors of public companies Setting up of Public Companies Accounting Oversight Board