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Simple Business


However, when the depreciation rate appro ximately equals the decline in
ma rket va lue, the resulting figures may be similar.
2.1.6. Financial Statements
(** check accounting definitions)
Financia l statements are prepared according to a set of accounting standards.
These standards are set by a national accounting authority, and a re detailed
and rigid in defining the way in wh ich a wide range of indiv idual transactions
are recorded in the accounts.
However, in many situations there is scope to classify a mounts in s everal
ways, or to perform calculat ions using a number of alternative methods, and
these differences can have a significant bearing on the overall structure of the
accounts.
Accounting standards vary significantly fro m place to place and fro m t ime to
time.
Audited accounts are required for forma l reporting to regulatory authorities,
for reporting to stock e xchanges, and for informat ion supplied to investors.
The audit process is conducted by independent auditors, and may be
performed by accounting firms.
The audit process includes the following steps
? Revie wing individual transactions at random.
? Revie wing the way in which ma jor ite ms are a llocated in the
accounts.
? Checking that adequate standards exist for recording transactions,
reconciling information sources and preparing financia l statements.
? Ensuring that the financial statements are prepared in a way that is
consistent with the accounting standards.
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