Question

What are the four accounting dialects (or sets of “books”), according to the author? How does the concept of dialects make the job of the auditor more difficult?

Answer 1

Four types of accounting dialects (sets of “books”), according to the author are as follows :

1.Conservatism is the dialect by which, when two values of a transaction are available, the lower-value transaction is recorded. By this dialect, profit should be over estimated, and there should always be a provision for losses.

2. Consistency precribes the use of the same accounting principles from one period of an accounting cycle to the next, so that the same standards are applied to calculate profit and loss.

3. Materiality means that all material facts should be recorded in accounting. Accountants should record important data and leave our insignificant information.

4. Full disclosure entails the revelation of all information, both favourable and deterimental to a business enterprise, and which are of material value to creditors and debtors.

These concepts make the job of auditor more difficult in the following ways:

- The assessment of the risks of material misstatements of financial statements, including the potential effects of fraud, bias and business risk.

- The identification, performance and assessment of audit procedures to address those risks.

- The evaluation of audit evidence to determine the quality and meaning of that evidence and to assess the need for additional evidence based on the process.

- The formation of an opinion on the financial statements and the decision whether or not to express that opinion.