Chapter 1 auditors: Auditors to the rescue!

http://www.phillyburbs.com/news/local/the_intelligencer/the_intelligencer_news_details/article/27/2009/september/11/auditor-hired-to-target-business-taxes.html 

Summary

The supervisors of the town Warminster in Wiltshire, England, has just unanimously decided to hire an outside auditory to monitor and pursue the hundreds and thousands of dollars that the businesses are trying to escape paying. McCarthy & Co., a Lafayette Hills accounting firm will be responsible for collecting the business taxes of Berkheimer. The object of this mission is to identify the businesses who have underpaid their business taxes or have not paid at all. Township Manager, Robert Tate, suggested that paying the auditors an hourly wage of $115 will be more favorable when businesses challenge auditors in the courts. For those businesses who have avoid paying taxes, the township offers an amnesty program to help businesses pay back the taxes owed by the end of the year.

Connection

In our textbook - Financial Accounting, page.34, describes the job of an auditor. The description of auditors are "...professionally trained accountants who add credibility to the financial statements by expressing their professional opinion as to whether the financial states fairly present the company's result." And that is what McCarthy & Co. is doing here. As their job description outlined, they will be investigating the company and will then verify the various procedures and the reasonableness of the financial numbers that the company has provided. Sometimes while commissioned to verify the financial states of a certain company, the auditors might come across fake statements made up by the company. The company will insert beautiful numbers to create a fake statement with the objective to capture investor's interest into investing into their company. Auditors help stop these frauds.

Reflection

I think now that Wiltshire begin to have auditors monitor the business companies, there will be less frauds, scandals and tax evasions. In a sense, this will be the law and order in the business world. In my point of view, auditors are like investigators and judges. They investigate and verify if a company's financial statements are true. If they are, the auditors will consent the numbers that the company has provided. If not, then penalties and consequences will follow. I was also thinking that maybe the township has suddenly unanimously decided to hire outside auditors is maybe because of the tax evasions and scandals that might be increasing over the years significantly. 

Kate Wong