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INFLATION
ACCOUNTING
1.
Current Purchasing Power ( CPP / GPP ) Method
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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
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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.
Price index
( Average 160 )
100
200
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Ascertain the monetary result of the following at the end of
2009
1.1.09
31.12.09
Bank
2000
3000
Debtors
10000
12000
Creditors
15000
10000
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Compute the net monetary result as on 31.12.08
1.1.09
31.12.09
 Cash
5000
10000
 Debtors
20000
25000
 Creditors
15000
20000
 Loan taken
20000
15000
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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
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- Adjustment of stocks
- Adjustment of depreciation
- Monetary working capital adjustment
Valuation of Balance Sheet items
-
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-
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
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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)
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Institute of Chartered Accountants of India
Emerging Dimensions in Voluntary Financial reporting
1.
2.
4.
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3.
Value reporting
Human Resource Accounting
Brand valuation
Economic Value Added Statement
AUDITING
Do managers need to know auditing ?
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.
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“ Whenever we need to know what is happening ,it is best
to ask those who is responsible before asking outsiders”
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
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
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
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
Types of audit
1.
2.
4.
5.
6.
7.
8.
9.
10.
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3.
Statutory audit
Internal audit
Cost audit
Management audit
Operational audit
Marketing audit – Strategy / organization /
System / productivity
Propriety audits
Balance Sheet Audit
Tax Audit
Investigations
Special audits
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Energy audits
Environment audit
HR audit
Social audit
ISO Audit
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ISO 9000 – Quality Management System
ISO 9001- Certifies the procedures covering the key
processes in the business
ISO 14000 – Environmental management standards
ISO 19011 – 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
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Child labour
 Health and Safety
 Freedom of Association and Right to collective
Bargaining
 Discrimination
 Working hours
 Discipline
 Management and compensation



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
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
Sarbanes Oxley Act 2002 ( SOX )
Setting up of Public Companies Accounting Oversight Board