Page 38 - DCOM509_ADVANCED_AUDITING

Unit 2: Auditing Standards and IFRS

oil and gas company with operations in virtually every aspect of China’s oil and gas Notes
industry, including exploration and production, refining and marketing, natural gas
transmission, and petrochemicals. PetroChina manages some 70 percent of China’s oil
and gas reserves and 45 percent of its oil-refining capacity. Its shares were listed on the
Hong Kong and New York Stock Exchanges in 2000.
You are an equity research analyst and have been asked to prepare a research report on
PetroChina. Your business strategy analysis indicates that PetroChina’s sales growth and
financial performance can probably be sustained.
However, although your qualitative analysis has yielded promising results, you are
concerned that your financial analysis will be difficult due to accounting and audit-quality
issues.
You start your analysis by becoming familiar with the accounting principles used to
prepare PetroChina’s financial statements filed with the U.S. Securities and Exchange
Commission. You are encouraged that the company states that its financial statements
conform to IASB standards, but realize that how accounting standards are applied is as
important as the standards themselves.
Required
PetroChina’s financial statements filed with the U.S. Securities and Exchange Commission
may be found at www. petrochina.com.cn/resource/EngPdf/ annual/20-f_2008.pdf.
Examine Petro China’s Note 3, “Summary of Principal Accounting Policies,” and read
about the IASB Standards on the IASB Web site (www.iasb.org) and the IAS Plus Web site
(www.iasplus.com).
Questions:

1. As much as possible, assess the extent to which PetroChina’s accounting principles
conform to IASB standards.
2. How reliable is your assessment?

3. What further information would help your assessment?
4. Does the auditor’s report provide information useful in your assessment? Explain.

Source: http://ebooks.narotama.ac.id/files/International%20Accounting%20(7th%20Edition)/
Chapter%208%20%20%20Global%20Accounting%20And%20Auditing%20Standards.pdf

2.5 Summary

 Generally Accepted Accounting Principles (GAAP) is defined as the standard guidelines of
accounting rules for financial accounting and to prepare financial statements for private
companies and the companies trading publicly in United States.

 It chalks down the standards, conventions, and rules for accountants to pursue in recording
and summarizing transactions, and in the preparation of financial statements.
 In United States these rules are decided by the Governmental Accounting Standards Board
(GASB) which applies to local and state governments.
 The looming decisions about the future of accounting standards in the United States involve
complex and challenging questions.

 While there are significant benefits for investors, businesses, and the entire economies of
having all nations move to a single, uniform set of high-quality accounting standards,
there are a number of considerations that need to be evaluated in making such a transition.

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