The first page of any financial report, after the cover page and the table of contents, is the public accountant's letter directed to the stockholders. The letter's wording is usually fixed, unless the report includes unusual findings. I offer here a section from the fixed version; the emphasis is mine.
"We conducted our audit according to the auditing standards acceptable in Israel, including the standards set in the Public Accountants Regulations (the Public Accountant's Way of Conduct) of 5733 – 1973. According to these standards, we are required to plan the audit and conduct it for the purpose of achieving a reasonable measure of certainty that the financial reports do not constitute a substantially erroneous presentation.
An audit includes a sample check of evidence that support the amounts and the information in the financial reports. An audit also includes a review of the accounting principles that were implemented and of the substantial estimates made by the company's management and board of directors, as well as an estimate of the suitability of the financial reports' presentation in its entirety. We think that our audit and our other public accountants' reports provide an appropriate basis for our expert opinion."
This is the Israeli version, which is not substantially different from the acceptable wording in many countries around the world. Many capital owners tend to skip this letter and go directly to the financial report itself, i.e., to the profit and loss report and the rest of the reports and the analyses. However, the letter is an important document, which, in fact, clarifies the nature of the public accountant's job. I emphasized words which clarify two important points:
The audit is conducted based on a sample.
The report is, in fact, a report by the company management, and the public accountant only expresses his opinion on the report.
So much for the theory. Let’s move on to reality.
I will describe reality through my personal story and the road I traveled in the profession I chose for myself. I completed my Accountancy studies at Tel-Aviv University in 1999, and started working right away as an intern in a public accounting firm that had been the Israeli representative of one of the largest public accounting firms in the world.
At the end of 2001, one of the world's gigantic energy companies collapsed. The reason for the collapse was a deliberately erroneous accounting report. The firm where I worked was the one representing the American energy company.
At that time, I was completing my internship. The saga of the collapse of the energy company affected me personally. The firm for which I worked gradually crumbled, and is, today, part of another firm. Like many others, I looked for a new job. I decided to leave the field of public accounting and auditing and crossed over to the other side – the side of private accounting and bookkeeping.
I started working for a relatively small company. I was in charge of all its financial aspects, from receiving invoices to preparing salaries and management reports. Each quarter, the interns from a public accounting firm arrived and audited me. Once, an intern said a few sentences that remain etched in my memory: "It’s a joke that I’m auditing you. You could teach me! The entire system’s upside down. First, I have to do what you’re doing. Only then can I audit you."
He was right.
Fifteen years have passed since then, and his words still ring true.
After leaving the firm where I interned, I worked mostly in the field of bookkeeping and private accounting. It’s considered dull, and not so glamorous, but, with time, I’ve discovered that dealing with bookkeeping was precisely what has turned me into a better CPA. Today, I understand accounting processes and can read financial reports much more thoroughly due to my bookkeeping background. I’m certain that such knowledge can prevent quite a few mistakes - and embezzlement.
If you made it so far, dear readers, you’re probably asking yourselves why all this is your concern at all. However, this matter concerns almost every person in the world.
Almost every one of us has invested in a public company in some form, whether through our private bank account or through a pension fund. In fact, we’re all stockholders; we all need the faithful services of public accountants; and we all want them to know how to perform their work properly.
The sums of money that we set aside are intended to help us when we need them. Our public accountants are our guard dogs, and we want them to know how to guard our money in the best possible manner.
ABOUT THE AUTHOR
Michal Hartstein was born in 1974 in Israel into a religious family, studied economics and accounting at the University of Tel Aviv and started a career in finance.
In 2006, after becoming a mother, she decided to change direction and began to write. For several years, she has written a popular personal blog, and in 2011 published her first book, Confession of an Abandoned Wife. After two years she published her second book, Hill of Secrets. In 2014 she participated in the Israeli Nanowrimo contest and wrote Déjà Vu. The book was one of the winners and was published in Israel in 2015. Her fourth book, The Hit, (the second book in the Hadas Levinger series) was published in 2018.
Ms. Hartstein’s books vividly describe the life of the Israeli middle class, focusing on middle class women.
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The Hit Page 21
