Evergreens
Nevertheless offshore finance has shown a “puzzling resilience”, confounding predictions of decline because of its supposed vulnerability to the regulatory clampdown imposed from outside, says Mr Sharman. An academic study last year found that OFCs’ foreign owned deposits had actually risen slightly in 2007-2011. Mr. Sharman attributes their staying power to a growing clientele in Asia and other emerging markets which has offset a decline in America and Europe.
Offshore operators put the havens’ endurance down to their legitimate uses, such as their “tax-neutral” role in mediating international financial flows (of which more later) and the protection they offer from unstable or capricious governments though they believe these uses are poorly understood. Tax libertarians think the havens meet a need created by the complexity and punitive nature of some national tax codes. Their latest hero is Gérard Depardieu, who has taken Russian citizenship in protest against a proposed French supertax on the rich. Besides, they point out, OECD countries also compete on tax. Britain, for example, which has the second-lowest corporate-tax rate among the G8 (after Russia), recently cut it further.
Critics counter that the use of offshore centres involves more sleight of hand than genuine competition. Money is routed through them merely to shelter it from taxes, undermining collection in the client’s home country, where he will continue to benefit from tax funded public services without paying his way. Ultimately, says Nicholas Shaxson, one of the offshore industry’s most prominent critics, its appeal rests on “providing rich individuals and corporations with financial boltholes, where they can do things with their money that they wouldn’t be allowed to do at home”. He believes that legally enshrined secrecy is just as important to the havens’ success as low tax.
Individuals have a right to financial confidentiality, but only as long as they set about their business lawfully. When it comes to tax crimes, money-laundering and the like, such confidentiality needs to be set aside. Some OFCs still make this difficult, and layering by service providers compounds the problem: try penetrating this estimate is too high, but the figure is clearly substantial. What is less clear is the proportion that ends up in OFCs rather than in one of the laxer onshore jurisdictions. Estimates of tax-revenue losses onshore are equally imprecise. Some think, for example, that Britain’s “tax gap” the difference between
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tax owed and collected is much bigger than the authorities care to admit: perhaps close to 7% of the total collected in 2010-2011. On the other hand tax losses are sometimes overestimated, for instance by assuming that the full rate would have been paid if the money had been kept there.
Fill the gaps using the words:
Financial, tax, offshore investment, benefit
1.Money is routed through them merely to shelter it from taxes, undermining collection in the client’s home country, where he will continue to … from tax funded public services without paying his way.
2.Since then … havens have been under sporadic attack, including two waves of blacklisting.
3.Over 30% of global foreign direct … is booked through havens.
4.… operators put the havens’ endurance down to their legitimate uses, such as their “tax-neutral” role in mediating international financial flows (of which more later) and the protection they offer from unstable or capricious governments though they believe these uses are poorly understood.
5.The Boston Consulting Group reckons that on paper roughly $8 trillion of private … wealth out of a global total of $123 trillion sits offshore, but this excludes property, yachts and other fixed assets.
Write down all words connected with economy
Make up your plan to this article
Reproduce the text using your list of the words and your plan
Unit 8
Warming up activities
What do you know about assessment standarts? Which of the implications for the external and internal auditors exsist?
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Vocabulary:
beefed-up peer review – усиленная экспертная оценка apprehension – опасение
to benefit from – получать выгоду fiscal – финансовый
disclosures – сведения
implementing responses – реализация ответов a misstatement – искажение
in accordance with – в соответствии с supervisory – надзор
a whistleblower – осведомитель
Look through the following text and answer the following questions:
1.Why are two sets of risk-related audit standards?
2.How can you explain Audit Risk and Audit Planning?
3.Who is to identify and appropriately assess the risks of material misstatement?
4.Why is it essential for auditors to comply with assessment standards?
A Spotlight on Risk Assessment Standards
By Ronald Kral, MBA. October 25, 2011.
As a frequent business traveler across the United States, I have interacted with many external audit firms this year. As we enter the heavy audit season it is clear that “risk” is a topic of primary interest for audit teams, especially for partners and managers who oversee the process. For auditors of private companies and non-profit organizations the talk has been about beefed up peer review focus on how the audit team addresses risk. For auditors of public companies a bit of apprehension is in the air regarding the new risk assessment standards effective for the first time in 2011.
Although there are two sets of risk related audit standards from different sources, one for public company auditors and another for private companies, they indeed share the same fundamentals. The intent of this article is not to discuss the differences, but rather to summarize practical
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implications for auditors and the companies they audit. Although the following perspective is primarily for auditors of public companies, all auditors and organizations subject to an external audit benefit from better understanding risk standards.
Risk Assessment Standards for Public Company Audits.
The Sarbanes Oxley Act of 2002 authorized the Public Company Accounting Oversight Board (PCAOB) to establish auditing and related professional practice standards to be used by registered public accounting firms. Auditors of public companies must be registered with PCAOB and refer to "the standards of the Public Company Accounting Oversight Board (United States)” in their audit reports.
PCAOB Rule 3100, Compliance with Auditing and Related Professional Practice Standards, requires the auditor to comply with all applicable auditing and related professional practice standards of the PCAOB. The PCAOB auditing standards, numbers 8 through 15, are collectively referred to as the “risk assessment standards.” These standards are effective for audits of fiscal years beginning on or after Dec. 15, 2010:
AS No. 8: Audit Risk. The objective of the auditor is to conduct the audit of financial statements in a manner that reduces audit risk to an appropriately low level. To form an appropriate basis for expressing an opinion on the financial statements, the auditor must plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement due to error or fraud. Reasonable assurance is obtained by reducing audit risk to an appropriately low level through applying due professional care, including obtaining sufficient appropriate audit evidence.
AS No. 9: Audit Planning. The objective of the auditor is to plan the audit so that the audit is conducted effectively. Planning the audit includes establishing the overall audit strategy for the engagement and U.S. Generally Accepted Auditing Standards (GAAS), as authored by the American Institute of Certified Public Accountants' (AICPA) Auditing Standards Board (ASB), apply to private companies and non-profit organizations. Standards of the Public Company Accounting Oversight Board (PCAOB), apply to public company audits. The PCAOB adopted as interim standards, on an initial and transitional basis, GAAS in existence on April 16, 2003.
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AS No. 10: Supervision of the Audit Engagement. The objective of the auditor is to supervise the audit engagement, including supervising the work of engagement team members so that the work is performed as directed and supports the conclusions reached. The engagement partner is responsible for the engagement and its performance. Accordingly, the engagement partner is responsible for proper supervision of the work of engagement team members and for compliance with PCAOB standards, which extends to the work of specialists, other auditors, internal auditors, and others who are involved in testing controls.
AS No. 11: Consideration of Materiality in Planning and Performing an Audit. The objective of the auditor is to apply the concept of materiality appropriately in planning and performing audit procedures. The auditor should evaluate whether, in light of the particular circumstances, there are certain accounts or disclosures for which there is a substantial likelihood that misstatements of lesser amounts than the materiality level established for the financial statements as a whole would influence the judgment of a reasonable investor. If so, the auditor should establish separate materiality levels for those accounts or disclosures to plan the nature, timing, and extent of audit procedures for those accounts or disclosures.
AS No. 12: Identifying and Assessing Risks of Material Misstatement. The objective of the auditor is to identify and appropriately assess the risks of material misstatement, thereby providing a basis for designing and implementing responses to the risks of material misstatement. Risks of material misstatement can arise from a variety of sources, including external factors, such as conditions in the company's industry and environment, and company specific factors, such as the nature of the company, its activities, and internal control over financial reporting. For example, external or company specific factors can affect the judgments involved in determining accounting estimates or create pressures to manipulate the financial statements to achieve certain financial targets. Also, risks of material misstatement may relate to personnel, who lack the necessary financial reporting competencies, information systems that fail to accurately capture business transactions or financial reporting processes that are not adequately aligned with the requirements in the applicable financial reporting framework.
AS No. 13: The Auditor's Responses to the Risks of Material Misstatement. The objective of the auditor is to address the risks of material misstatement through appropriate overall audit responses and audit procedures.
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