The Degree of risk will not be differing by comparing...

Comparative Study Between Audit On Profit Organizations And Audit On Non-profit Organizations

Deduction

To our parent, who scarify for our benefits and make us what we are now.

To our brothers and sisters, who we grew together.

To our professors and lecturer, who gave us their knowledge and experience.

To our friends, who support us all the time.

To our country Palestine.

2


Abstract This study aimed to explain and clarify the deference between auditing in

profit and non for profit organizations, to solve the refusing that exist in our

mind.

The three researchers in collecting data depend on the primary sources and

secondary sources, to achieve the goals of the study and in answering its

questions. Through this approach they obtained the secondary data which

formed the theoretical frame for the study. Meanwhile the practical frame

depended on an interview which was designed for the subject goal.

The study came to a group of results and recommendations, which are

related to explain the deference between auditing in profit and non for profit

organizations, and the most important results are, “there is no any difference there is no any difference

between the audit standards used in profit and nonprofit organization but, between the audit standards used in profit and nonprofit organization but,

there is a difference between audit procedures used in audit on profit and there is a difference between audit procedures used in audit on profit and

nonprofit organization.”nonprofit organization.”

The most important recommendations The most important recommendations of which are more efforts to create create

of a Palestinian law for profit corporations and applied to suit the needs of of a Palestinian law for profit corporations and applied to suit the needs of

the Palestinian companies especially in this volatile economy.the Palestinian companies especially in this volatile economy.

3


ContentsDeduction2Abstract3Content4

Chapter 1: (GENERAL FRAME WORK OF THE RESEARCH)................51.1 Introduction....................................................................................................61.2 reachears problem ..........................................................................................71.3 Assumption ....................................................................................................71.4 Research Hypotheses .....................................................................................81.5 Research Objectives.......................................................................................91.6 The Importance Of The Study .....................................................................101.7 Research Methodology.................................................................................10Chapter 2:( CONCEPTS AND PRINCIPLES ).............................................112.1 Auditing in Theory........................................................................................122.2 Audit History.................................................................................................142.3 Importance of Audit......................................................................................162.4 student requirements ....................................................................................172.5 administrator requirements............................................................................18Chapter 3 (DIFFRENCE BETWEEN PROFIT AND NONPROFIT ORGANIZATION).............................................................................................................................213.1 Defining of Profit and Non-Profit Organizations .........................................223.2 Law between Profit and Non-profit Organizations.......................................233.3 Financial Statements ....................................................................................243.4 Internal System..............................................................................................283.5 Documents used in The Profit and Non-profit Organizations ......................303.6 Accounting Standards between Profit and Non-profit Organizations...........313.7 Audit Standards used in Profit and Non-profit Organizations .....................323.8 Audit Procedures used On Profit and Non-profit Organizations..................35Chapter 4: (PREVIUOS STUDIES AND INTERVIEWS WITH THE AUDITORS).........384.1 Previous Studies...........................................................................................394.2 Interviews with auditors...............................................................................45Chapter 5: (Results and Recommendations)..................................................585.1 Result ...........................................................................................................595.2 Recommendations........................................................................................615.3 References....................................................................................................62

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Chapter 1

GENERAL FRAME WORK OF THE RESEARCH

1.1 Introduction1.2 Research Problem1.3 Assumption1.4 Research Hypotheses1.5 Research Objectives1.6 The Importance Of The Study1.7 Research Methodology

5


1.1 INTRODUCTION

Since Many Years, Man was doing his work and make its accountsSince Many Years, Man was doing his work and make its accounts

without the knowledge that reliable on, But with the development of sciencewithout the knowledge that reliable on, But with the development of science

and technology and the spread of trade across the world It has becomeand technology and the spread of trade across the world It has become

necessary and important to find the science of financial operations that madenecessary and important to find the science of financial operations that made

every second.every second.

After the creation of accounting science the development of trade and the After the creation of accounting science the development of trade and the

spread of companies across the world and the presence of multinationalspread of companies across the world and the presence of multinational

companies therefore, accounting is no longer enough alone, so the expertscompanies therefore, accounting is no longer enough alone, so the experts

decides to find a complement to the science of accounting which is calleddecides to find a complement to the science of accounting which is called

Auditing.Auditing.

Audit is an Audit is an examinationexamination and and verificationverification of a of a company'scompany's financialfinancial and and

accounting recordsaccounting records and and supporting documentssupporting documents by a by a professionalprofessional, such as a, such as a

Certified Public AccountantCertified Public Accountant..

Auditing becomes the first science that makes the owner and the donor feel Auditing becomes the first science that makes the owner and the donor feel

safety when he sees the signature of the external auditor on audit report.safety when he sees the signature of the external auditor on audit report.

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In This Research we decide to examine an important issue in the audit In This Research we decide to examine an important issue in the audit

which is “Comparative Study between Audit on Profit Organizations andwhich is “Comparative Study between Audit on Profit Organizations and

Audit on Non-profit Organizations.” Audit on Non-profit Organizations.”

1.2 RESEARCH PRPBLEM 1.2 RESEARCH PRPBLEM

When many people talk about audit they forgot an important type of audit When many people talk about audit they forgot an important type of audit

which is audit on non-profit organizations, may be some of them think thatwhich is audit on non-profit organizations, may be some of them think that

there is no difference between audit on profit and nonprofit organizationsthere is no difference between audit on profit and nonprofit organizations

and others don't know the main differences so we decide to discuss this. and others don't know the main differences so we decide to discuss this.

"Is There Any Difference between Audit on Profit Organizations and Audit"Is There Any Difference between Audit on Profit Organizations and Audit

on Non-profit Organizations"on Non-profit Organizations"

1.3 ASSUMPTION 1.3 ASSUMPTION

Yes, there is a big Difference between Audit on Profit Organizations and Yes, there is a big Difference between Audit on Profit Organizations and

Audit on Non-profit Organizations.Audit on Non-profit Organizations.

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1.4 RESEARCH HYPOTHESES 1.4 RESEARCH HYPOTHESES

oo There is a different between the mean of profit organization andThere is a different between the mean of profit organization and

nonprofit organization.nonprofit organization.

oo There is a different between accounting for profit organizations andThere is a different between accounting for profit organizations and

nonprofit organizations.nonprofit organizations.

oo There is a difference between the accounting standards used in profitThere is a difference between the accounting standards used in profit

and nonprofit organization.and nonprofit organization.

oo There is no any difference between the audit standards used in profitThere is no any difference between the audit standards used in profit


oo There is a difference between audit procedures used in audit on profitThere is a difference between audit procedures used in audit on profit


oo There is a difference between documents used in the profitThere is a difference between documents used in the profit

organization and nonprofit organization.organization and nonprofit organization.

oo There is a different between financial statements for profit andThere is a different between financial statements for profit and


oo There is a difference between the low used in profit organizations andThere is a difference between the low used in profit organizations and

nonprofit organizations. nonprofit organizations.

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1.5 RESEARCH OBJECTIVES 1.5 RESEARCH OBJECTIVES

oo Differentiate between the mean of profit organization and nonprofitDifferentiate between the mean of profit organization and nonprofit

organization.organization.

oo Differentiate between accounting for profit organizations andDifferentiate between accounting for profit organizations and


oo Differentiate the accounting standards used in profit and nonprofitDifferentiate the accounting standards used in profit and nonprofit


oo Differentiate between the audit standards used in profit and nonprofitDifferentiate between the audit standards used in profit and nonprofit


oo Differentiate between audit procedures used in audit on profit andDifferentiate between audit procedures used in audit on profit and


oo Documents used in the profit organization and nonprofit organization.Documents used in the profit organization and nonprofit organization.

oo Differentiate between financial statements for profit and nonprofitDifferentiate between financial statements for profit and nonprofit

organizations.organizations.

oo Differentiate between the low used in profit organizations andDifferentiate between the low used in profit organizations and

nonprofit organizations. nonprofit organizations.

9


1.6 IMPORTANCE OF THE STUDY 1.6 IMPORTANCE OF THE STUDY

This Study Shows Similarities and differences between audit on profit This Study Shows Similarities and differences between audit on profit

organizations and nonprofit organizations which gives the answers to manyorganizations and nonprofit organizations which gives the answers to many

questions among people in general and especially among accountants on thequestions among people in general and especially among accountants on the

relationship between profit and nonprofit organizations, the extent of therelationship between profit and nonprofit organizations, the extent of the

differences between them, procedures used on accounting and audit anddifferences between them, procedures used on accounting and audit and

ending with financial statements. ending with financial statements.

1.7 RESEARCH METHODOLOGY 1.7 RESEARCH METHODOLOGY

oo Source of Data Collection:Source of Data Collection:

Using Primary and Secondary Sources:Using Primary and Secondary Sources:

PrimaryPrimary:: Interviews with auditors. Interviews with auditors.

SecondarySecondary:: Data collected from previous studies. Data collected from previous studies.

oo Research Sample:Research Sample:

Five audit offices and 10 companies including profitFive audit offices and 10 companies including profit

and nonprofit. and nonprofit.

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Chapter 2

CONCEPTS AND PRINCIPLES

2.1 Auditing in Theory2.2 Audit History2.3 Importance of Audit2.4 Auditing Objectives2.5 Types of Auditors

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2.1 AUDITING IN THEORY

Audits are performed to ascertain the Audits are performed to ascertain the validityvalidity and and reliabilityreliability of of

information; also to provide an assessment of a system's information; also to provide an assessment of a system's internal controlinternal control. .

The goal of an audit is to express an opinion on the person - organization - The goal of an audit is to express an opinion on the person - organization -

system (etc.) in question, under evaluation based on work done on a testsystem (etc.) in question, under evaluation based on work done on a test

basis.basis.

Due to practical constraints, an audit seeks to provide only reasonable Due to practical constraints, an audit seeks to provide only reasonable

assurance that the statements are free from material error. Hence, statisticalassurance that the statements are free from material error. Hence, statistical

sampling is often adopted in audits. In the case of sampling is often adopted in audits. In the case of financial auditsfinancial audits, a set of, a set of

financial statements are said to be true and fair when they are free offinancial statements are said to be true and fair when they are free of

material misstatements - a concept influenced by both material misstatements - a concept influenced by both quantitativequantitative

(numerical) and (numerical) and qualitativequalitative factors. factors.

Auditing is a vital part of Auditing is a vital part of accountingaccounting. Traditionally, audits were mainly. Traditionally, audits were mainly

associated with gaining information about financial systems and theassociated with gaining information about financial systems and the

financial records of a company or a business. However, recent auditing hasfinancial records of a company or a business. However, recent auditing has

begun to include non-financial subject areas, such as safety, security,begun to include non-financial subject areas, such as safety, security,

information systems performance, and environmental concerns. Withinformation systems performance, and environmental concerns. With

nonprofit organizations and government agencies, there has been annonprofit organizations and government agencies, there has been an

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increasing need for increasing need for performance auditsperformance audits, examining their success in satisfying, examining their success in satisfying

mission objectives. As a result, there are now audit professionals whomission objectives. As a result, there are now audit professionals who

specialize in specialize in security auditssecurity audits, , information systems auditsinformation systems audits, and , and environmentalenvironmental

auditsaudits..

In In financial accountingfinancial accounting, an audit is an independent assessment of the, an audit is an independent assessment of the

fairness by which a company's financial statements are presented by itsfairness by which a company's financial statements are presented by its

management. It is performed by competent, independent and objectivemanagement. It is performed by competent, independent and objective

person(s) known as auditors, who then issue an person(s) known as auditors, who then issue an auditor's reportauditor's report based on the based on the

results of the audit.results of the audit.

In In cost accountingcost accounting, it is a process for verifying the cost of manufacturing, it is a process for verifying the cost of manufacturing

or producing of any article, on the basis of accounts measuring the use ofor producing of any article, on the basis of accounts measuring the use of

material, labor or other items of cost. In simple words the term, cost audit,material, labor or other items of cost. In simple words the term, cost audit,

means a systematic and accurate verification of the cost accounts andmeans a systematic and accurate verification of the cost accounts and

records, and checking for adherence to the cost accounting objectives. records, and checking for adherence to the cost accounting objectives.

According to the Institute of Cost and Management Accountants of According to the Institute of Cost and Management Accountants of

Pakistan, a cost audit is "an examination of cost accounting records andPakistan, a cost audit is "an examination of cost accounting records and

verification of facts to ascertain that the cost of the product has been arrivedverification of facts to ascertain that the cost of the product has been arrived

at, in accordance with principles of cost accounting."at, in accordance with principles of cost accounting."

An audit must adhere to generally accepted standards established by An audit must adhere to generally accepted standards established by

governing bodies. These standards assure third parties or external users thatgoverning bodies. These standards assure third parties or external users that

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they can rely upon the auditor's opinion on the fairness of financialthey can rely upon the auditor's opinion on the fairness of financial

statements, or other subjects on which the auditor expresses an opinion.statements, or other subjects on which the auditor expresses an opinion.

The Definition for Auditing and Assurance Standard (AAS) 1 by ICAI – The Definition for Auditing and Assurance Standard (AAS) 1 by ICAI –

“Auditing is the independent examination of financial information of any“Auditing is the independent examination of financial information of any

entity, whether profit oriented or not, and irrespective of its size or legalentity, whether profit oriented or not, and irrespective of its size or legal

form, when such an examination is conducted with a view to expressing anform, when such an examination is conducted with a view to expressing an

opinion thereon” opinion thereon”

2.2 AUDIT HISTORY 2.2 AUDIT HISTORY

Egyptians recorded in history as first people who work and develop Egyptians recorded in history as first people who work and develop

accounting and auditing job, in which the public employees were keepingaccounting and auditing job, in which the public employees were keeping

books for controlling the revenues and expenses.books for controlling the revenues and expenses.

The history record that both Greece and Egypt governments were using The history record that both Greece and Egypt governments were using

accounting and auditing to ensure the truth of accounts.accounting and auditing to ensure the truth of accounts.

The auditor in Greece was review the entries recorded in books. The word The auditor in Greece was review the entries recorded in books. The word

"Auditing" derived from Latina word “Audire" that means listening. Then in"Auditing" derived from Latina word “Audire" that means listening. Then in

fifteenth century the double entry method discovered, that lead thefifteenth century the double entry method discovered, that lead the

implementation of auditing more than easy and spread that lead to developimplementation of auditing more than easy and spread that lead to develop

auditing job. As result for industry revaluation and trading progress inauditing job. As result for industry revaluation and trading progress in

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Europe to establish huge projects and reason which help to develop auditingEurope to establish huge projects and reason which help to develop auditing

job and increase demand for auditing services, in which limited corporationsjob and increase demand for auditing services, in which limited corporations

established.established.

Economic and industrial progress lead to establish limited corporations Economic and industrial progress lead to establish limited corporations

that considered danger and important in the same time, it form importantthat considered danger and important in the same time, it form important

rule in the economy, so many laws issued to organize it.rule in the economy, so many laws issued to organize it.

Spread between management and property increase the demand on auditingSpread between management and property increase the demand on auditing

services to protect owner’s behalf.services to protect owner’s behalf.

The taxation and financial policies were playing important rule in auditing The taxation and financial policies were playing important rule in auditing

developing. As shown before we note increase demand on auditing services,developing. As shown before we note increase demand on auditing services,

the professional organizing movement discovered in UK in 1854, then inthe professional organizing movement discovered in UK in 1854, then in

Canada in 1880 then France 1881, then USA in 1882, Germany 1896,Canada in 1880 then France 1881, then USA in 1882, Germany 1896,

Australia 1904, Finland 1911.Australia 1904, Finland 1911.

The increase of auditing services demand lead to establish associations to The increase of auditing services demand lead to establish associations to

organize.organize.

The job and protect members behalf in societies such as in USA and UK: The job and protect members behalf in societies such as in USA and UK:

oo American Institute of Certified Public Accountants (AICPA) -USAAmerican Institute of Certified Public Accountants (AICPA) -USA

oo Citified Public Accountants (APAS) - USACitified Public Accountants (APAS) - USA

oo Financial Accounting Standers Board (FASB) - USAFinancial Accounting Standers Board (FASB) - USA

oo Internal Revenue Service’s (IRS) – USA Internal Revenue Service’s (IRS) – USA

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oo The Institute of Chartered Accountants (ICA) - UKThe Institute of Chartered Accountants (ICA) - UK

oo The Association at Certified Accountants (ACCA)-UKThe Association at Certified Accountants (ACCA)-UK

2.3 IMPORTANCE OF AUDIT2.3 IMPORTANCE OF AUDIT

There are many groups depend on Auditor report for make specific

decisions such as customers, management, banks and governmental bodies.

Importance of Audit for Customer:

oMain source of information through audited financial statements.

oBasic to get loans from banks.

oBasic for additional investments.

oBasic for prepare taxation statements.

oBasic to ensure of fairness of financial position.

Im portance of Audit for management:

Management depends completely upon accounting data, in

planning and takes suitable decisions, and evaluates it.

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Importance of Audit for Banks:

Audited Financial statements depend on Auditor report to analyze

statements before provide loans, and depended as basic to

determine degree of risk.

Importance of Audit for governmental bodies:

Audited financial statements depended for planning leading and

controlling the economic entities to ensure of binding laws and

procedures.

2.4 AUDITING OBJECTIVES

We can determine Auditing Objectives in two main groups traditional and

modern:

Traditional objective: classify into main and secondary

o Main objectives:

ensure of truth of financial statements

express independent opinion

o Secondary objectives:

Discover fraud.

Used in planning and polices.

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Ensure of fairly of financial statements.

Determine tax amounts.

Submit various reports.

Modern objectives:

o Control the plan and follow-up it's executes and the range of

goals achievement.

o Asses’ activities results.

o Achieve maximize range of efficiency and effective.

o Achieve maximize range of comfortable for society.

2.5 TYPES OF AUDITORS

Auditors of financial statements can be classified into two categories:Auditors of financial statements can be classified into two categories:

External auditorExternal auditor ::

Statutory auditorStatutory auditor is an independent is an independent Public accountingPublic accounting firm engaged firm engaged

by the client subject to the audit, to express an opinion on whether theby the client subject to the audit, to express an opinion on whether the

company's company's financial statementsfinancial statements are free of material misstatements, are free of material misstatements,

whether due to fraud or error. For whether due to fraud or error. For publicly-traded companiespublicly-traded companies, external, external

auditors may also be required to express an opinion over theauditors may also be required to express an opinion over the

effectiveness of effectiveness of internal controlsinternal controls over over financial reportingfinancial reporting. External. External

18


auditors may also be engaged to perform other agreed-uponauditors may also be engaged to perform other agreed-upon

procedures, related or unrelated to financial statements. Mostprocedures, related or unrelated to financial statements. Most

importantly, external auditors, though engaged and paid by theimportantly, external auditors, though engaged and paid by the

company being audited, are regarded as company being audited, are regarded as independent auditorsindependent auditors..

The most used external audit standards are the US The most used external audit standards are the US GAASGAAS of the of the

American Institute of Certified Public AccountantsAmerican Institute of Certified Public Accountants; and the ISA; and the ISA

International Standards on AuditingInternational Standards on Auditing developed by the developed by the InternationalInternational

Auditing and Assurance Standards BoardAuditing and Assurance Standards Board of the of the InternationalInternational

Federation of AccountantsFederation of Accountants

Internal auditorsInternal auditors ::

Internal auditors employed by the organization they audit. They Internal auditors employed by the organization they audit. They

perform various audit procedures, primarily related to procedures overperform various audit procedures, primarily related to procedures over

the effectiveness of the company's internal controls over financialthe effectiveness of the company's internal controls over financial

reporting. Due to the requirement of reporting. Due to the requirement of Section 404Section 404 of the of the SarbanesSarbanes

Oxley ActOxley Act of 2002 for management to also assess the effectiveness of of 2002 for management to also assess the effectiveness of

their internal controls over financial reporting (as also required of thetheir internal controls over financial reporting (as also required of the

external auditor), internal auditors are utilized to make thisexternal auditor), internal auditors are utilized to make this

assessment. Though internal auditors are not considered independentassessment. Though internal auditors are not considered independent

of the company they perform audit procedures for, internal auditors ofof the company they perform audit procedures for, internal auditors of

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publicly-traded companies are required to report directly to the publicly-traded companies are required to report directly to the boardboard

of directorsof directors, or a sub-committee of the board of directors, and not to, or a sub-committee of the board of directors, and not to

managementmanagement, so to reduce the risk that internal auditors will be, so to reduce the risk that internal auditors will be

pressured to produce favorable assessments.pressured to produce favorable assessments.

ConsultantConsultant auditors auditors are external personnel contracted by the firm to are external personnel contracted by the firm to

perform an audit following the firm's perform an audit following the firm's auditing standardsauditing standards. This differs from. This differs from

the external auditor, who follows their own auditing standards. The level ofthe external auditor, who follows their own auditing standards. The level of

independence is therefore somewhere between the internal auditor and theindependence is therefore somewhere between the internal auditor and the

external auditor. The consultant auditor may work independently, or as partexternal auditor. The consultant auditor may work independently, or as part

of the audit team that includes internal auditors. Consultant auditors are usedof the audit team that includes internal auditors. Consultant auditors are used

when the firm lacks sufficient expertise to audit certain areas, or simply forwhen the firm lacks sufficient expertise to audit certain areas, or simply for

staff augmentation when staff are not available.staff augmentation when staff are not available.

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Chapter 3

DIFFRENCE BETWEEN PROFIT AND NONPROFIT ORGANIZATION

3.1 Defining of Profit and Non-Profit Organizations

3.2 Law between Profit and Non-profit Organizations

3.3 Financial Statements

3.4 Internal System

3.5 Documents used in The Profit and Non-profit Org.

3.6 Accounting Standards between Profit and Non-profit

Org.

3.7 Audit Standards used in Profit and Non-profit Org.

3.8 Audit Procedures used On Profit and Non-profit Org.

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3.1 DEFINING OF PROFIT AND NON-PROFIT

ORGNIZATION

Profit organization

Organizations interact through various markets to achieve profit and to

maximize share holders wealth, profit organization classified into three

categories':

o proprietorship: Organization owned by one person, he and just he has the

authority to make anything, the organization end if he die.

o Partnership: Organization owned by two or more persons this organization

also provide goods and services to a chive profit.

o Corporations: Organization owned by many persons accordance to quota

of shares for each one, each one has responsibility to his shares.

Nonprofit organization:

Organizations do not have share holders it may have members, it may be

association. The organization may be controlled by its members who elect

board of directors or board of trustees, nonprofit organization may have

delegate structure to allow for the representation of groups as members.

The main goal for nonprofit organization is not achieve profit but to serve

the society.

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3.2 LAW BETWEEN PROFIT AND NON-PROFIT

ORGANIZATION

Profit Organizations:

Each organization need law to governed form all sides, profit organization

governed by laws established by the country for examples in Palestine

profit organizations governed by company law and investment law and so

on.

Nonprofit Organizations:

Most jurisdictions have laws governing the setting up, running, and

reporting requirements of these organizations, in many aspects they are

similar to business entities though there are often significant differences,

both profit and nonprofit must have board members, steering committee

members, or trustees who owe the organization.

Examples for laws on nonprofit organization (common wealth laws,

European Union nonprofit laws).

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3.3 FINANCIAL STATEMENTS

A financial statement (or financial report) is a formal record of the

financial activities of a business, person, or other entity. Although, the term

financial statement is also used particularly by accountants.

For a business enterprise, all the relevant financial information, presented

in a structured manner and in a form easy to understand, are called the

financial statements. They typically include four basic financial statements,

accompanied by a management discussion and analysis:

o Statement of financial position (Balance Sheet) : also referred to as

statement of financial position or condition, reports on a

company's assets, liabilities, and Ownership equity at a given point in

time.

o Income Statement : also referred to as Profit and Loss statement (or a

"P&L"), reports on a company's income, expenses, and profits over a

period of time. Profit & Loss account provide information on the

operation of the enterprise. These include sale and the various

expenses incurred during the processing state.

o Statement of Retained Earnings : explains the changes in a company's

retained earnings over the reporting period.

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o Statement of Cash Flows : reports on a company's cash flow activities,

particularly its operating, investing and financing activities.

For large corporations, these statements are often complex and may

include an extensive set of notes to the financial statements and management

discussion and analysis. The notes typically describe each item on the

balance sheet, income statement and cash flow statement in further detail.

Notes to financial statements are considered an integral part of the financial

statements.

Purpose of financial statements by business entities

The objective of financial statements is to provide information about

the financial position, performance and changes in financial position of

an enterprise that is useful to a wide range of users in making economic

decisions. Financial statements should be understandable, relevant,

reliable and comparable. Reported assets, liabilities, equity, income and

expenses are directly related to an organization's financial position.

Financial statements are intended to be understandable by readers who

have a reasonable knowledge of business and economic activities and

accounting and who are willing to study the information diligently.

25


Financial statements may be used by users for different purposes

Owners and managers require financial statements to make important

business decisions that affect its continued operations. Financial

analysis is then performed on these statements to provide management

with a more detailed understanding of the figures. These statements are

also used as part of management's annual report to the stockholders.

Employees also need these reports in making collective

bargaining agreements (CBA) with the management, in the case of labor

unions or for individuals in discussing their compensation, promotion

and rankings.

Prospective investors make use of financial statements to assess the

viability of investing in a business. Financial analyses are often used by

investors and are prepared by professionals (financial analysts), thus

providing them with the basis for making investment decisions.

Financial institutions (banks and other lending companies) use them to

decide whether to grant a company with fresh working capital or extend

debt securities (such as a long-term bank loan or debentures) to finance

expansion and other significant expenditures.

26


Government entities (tax authorities) need financial statements to

ascertain the propriety and accuracy of taxes and other duties declared

and paid by a company.

Vendors who extend credit to a business require financial statements to

assess the creditworthiness of the business.

Media and the general public are also interested in financial

statements for a variety of reasons.

Financial statements of non-profit organizations:

The financial statements of non-profit organizations that publish

financial statements, such as charitable organizations and large voluntary

associations, tend to be simpler than those of for-profit corporations.

Often they consist of just a balance sheet and a "statement of activities"

(listing income and expenses) similar to the "Profit and Loss statement"

of a for-profit. Charitable organizations in the United States are required

to show their income and net assets (equity) in three categories:

Unrestricted (available for general use), Temporarily Restricted (to be

released after the donor's time or purpose restrictions have been met), and

Permanently Restricted (to be held perpetually, e.g., in an Endowment).

27

Board of Director

GeneralManager

Employees Affairs

Production Management

Marketing Management

Financial Management


3.4 INTERNAL SYSTEM

Profit organization:

The board of director in the profit organization is part of share holders to

manage the organization and to hire general manager and his management

the main goal is to maximize wealth, they supported by their capital.

o From the chart we show that the management and it's department

(financial, marketing, production and so on) seeking just to get profit

and to maximize wealth of share holders

28

Board of Director

Services Management

Financial Management


Nonprofit Organization:

In nonprofit organization the board of director don't seek to get profit but

to search and get donations from donors to service society from may sides

such as (economic, medical, educational and so on).

o In which the services management service society and provide helps

to society and financial management many financial affairs of the

organization (donations, expenditures and so on)

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3.5 DOCUMENTS USED IN THE PROFIT AND NON-

PROFIT ORGANIZATION

Profit Organizations:

The Profit Organizations organize their documents depending on their needs to make work

easier and more clear than any time else.

Based on the type of profit organizations the documents issued, and the following table shows

the differences between the profit organizations documents:

Industrial Trade Service

Revenues Sale invoice Sale invoice Service invoice

Purchases Purchase invoice Purchase invoice Just expense invoice

Order , Bids … Order … etc

Nonprofit Organizations:

Because nonprofit organizations in not for profit that mean it did not sell

goods or make a service to have money , it's goal is social to help citizens

and society to develop more and more, So it use another type of documents

which is Money vouchers. Money vouchers depend on cash basis that the

time we pay we take a receipt voucher and the time we take money we give

receipt voucher.

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3.6 ACCOUNTING STANDARDS BETWEEN PROFIT

AND NON-PROFIT ORGANIZATIONS

Because of the development of the businesses around the world and ending in the multinational

companies, the world needed to have international accounting standards to make it easy to

account to every company in this world.

International accounting standards putted before about 17 years but the board of international

accounting standards established in 2001 in London and its members are 14 around the world, the

international accounting standards edited by need and it developed to be suitable for the new

projects around the world.

Now we have 41 international accounting standards, it edited in 2010 to be easier to deal with

the international trade.

The international accounting standards contain and arrange every stage and type of accounting.

The International accounting standards contain the standards to deal with the profit and

nonprofit organizations and there are different type of standards used in this organizations some

of it is the same and the other is differ, for an example the profit organizations use accrual basis

or modified accrual basis as suitable for the king of business but in the nonprofit organizations

have to use cash basis because of the nature of this organizations.

31


3.7 AUDIT STANDARDS USED IN PROFIT AND NON-

PROFIT ORGANIZATIONS

There is no difference between audit standards used in profit and nonprofit There is no difference between audit standards used in profit and nonprofit

organizations because all of it depends on the auditor personality. And hereorganizations because all of it depends on the auditor personality. And here

is the generally accepted audit standard:is the generally accepted audit standard:

General StandardsGeneral Standards

oo The auditor must have adequate technical training and proficiency toThe auditor must have adequate technical training and proficiency to

perform the audit.perform the audit.

oo The auditor must maintain independence in mental attitude in allThe auditor must maintain independence in mental attitude in all

matters related to the audit.matters related to the audit.

oo The auditor must use due professional care during the performance ofThe auditor must use due professional care during the performance of

the audit and the preparation of the report.the audit and the preparation of the report.

32


Standards of Field WorkStandards of Field Work

oo The auditor must adequately plan the work and must properlyThe auditor must adequately plan the work and must properly

supervise any assistants.supervise any assistants.

oo The auditor must obtain a sufficient understanding of the entity and itsThe auditor must obtain a sufficient understanding of the entity and its

environment, including its internal control, to assess the risk ofenvironment, including its internal control, to assess the risk of

material misstatement of the financial statements whether due to errormaterial misstatement of the financial statements whether due to error

or fraud, and to design the nature, timing, and extent of further auditor fraud, and to design the nature, timing, and extent of further audit

procedures.procedures.

oo The auditor must obtain sufficient appropriate audit evidence byThe auditor must obtain sufficient appropriate audit evidence by

performing audit procedures to afford a reasonable basis for anperforming audit procedures to afford a reasonable basis for an

opinion regarding the financial statements under audit.opinion regarding the financial statements under audit.

Standards of ReportingStandards of Reporting

oo The auditor must state in the auditor's report whether the financialThe auditor must state in the auditor's report whether the financial

statements are presented in accordance with generally acceptedstatements are presented in accordance with generally accepted

accounting principles.accounting principles.

oo The auditor must identify in the auditor's report those circumstancesThe auditor must identify in the auditor's report those circumstances

in which such principles have not been consistently observed in thein which such principles have not been consistently observed in the

current period in relation to the preceding period.current period in relation to the preceding period.

33


oo When the auditor determines that informative disclosures are notWhen the auditor determines that informative disclosures are not

reasonably adequate, the auditor must so state in the auditor's report.reasonably adequate, the auditor must so state in the auditor's report.

oo The auditor must either express an opinion regarding the financialThe auditor must either express an opinion regarding the financial

statements, taken as a whole, or state that an opinion cannot bestatements, taken as a whole, or state that an opinion cannot be

expressed, in the auditor's report. When the auditor cannot express anexpressed, in the auditor's report. When the auditor cannot express an

overall opinion, the auditor should state the reasons therefore in theoverall opinion, the auditor should state the reasons therefore in the

auditor's report. In all cases where an auditor's name is associated withauditor's report. In all cases where an auditor's name is associated with

financial statements, the auditor should clearly indicate the characterfinancial statements, the auditor should clearly indicate the character

of the auditor's work, if any, and the degree of responsibility theof the auditor's work, if any, and the degree of responsibility the

auditor is taking, in the auditor's report.auditor is taking, in the auditor's report.

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3.8 AUDIT PROCEDURES USED ON PROFIT AND NON-

PROFIT ORGANIZATIONS

Audit procedures are summarized as follows with Differentiate between profit organization

procedures and nonprofit organization procedures in every step.

o Understand the nature of the client in terms of legal entity and the type of activity and its

organizational structure and accounting systems and in the light of this information to the

auditor to accept the task of checking the operation or to apologize for that.

The Objective of the Profit Organizations Is To make profit but in the nonprofit it's goal is to

achieve social and economic development.

The Accounting System differs because of the nature of the accounts used.

oo Understand the components of internal control systems available to the client and include

understanding environment systems of internal control mechanism (accounting systems

used), and procedures for internal control systems and know how to put into practice and

through which therefore determines the extent to which customer accounts to sift through it

If it turns out his indivisibility of the audit by the withdrawal from the task.

Every Type of Organizations has its internal control which can be suitable for the uses of

every type.

oo Evaluate the degree of risk in the systems of internal control, if it was agreed that the degree

of risk is high in that reveal internal control systems automatically material things which

35


showed what they are not in the closing statements are risks checking high or when the

degree of risk in auditing low must understand the control systems and identify things

strengthen the conviction that the auditor because the degree of risk is substandard.

The Degree of risk will not be differing by comparing profit and

nonprofit organization; it can be differing `by the nature of organization

projects and organization members.

oo Empirical Audit:

Auditors’ uses its assessment of internal control systems and his degree of risk of audit in

determining the nature of the audit, the timing of audit work and the time required for the audit

and the size of the sample.

In This Stage of Audit Procedures There IS No Any Different Can Be Happen between Profit andIn This Stage of Audit Procedures There IS No Any Different Can Be Happen between Profit and

Non-Profit Organization Because This Stage Depend On The auditor size of the work not on theNon-Profit Organization Because This Stage Depend On The auditor size of the work not on the

kind of it.kind of it.

oo Evaluate the results of the audit

After the auditor finish his work he will assess the results of the work and decide if he can base

of his work result to give an opinion on the financial statement of the organization ..

In This Stage we can say that the nature of the profit organizations will beIn This Stage we can say that the nature of the profit organizations will be

harder to understand and check.harder to understand and check.

oo Auditor's Report:

36


The Last Stage and procedure in the audit procedures is the auditor report

which in the auditor give his opinion about the fairness of the financial

statements of the organization.

The Difference in this stage between profit and nonprofit organizations is

the financial statements itself, the financial statements of the profit

organizations are: Balance sheet, Profit And loss, Trade, Cash Flow...Etc.,

but these financial statements are not the same in nonprofit organization,

profit organization financial statements are: Statement Of Activity and

Special Purpose Statement.

37


Chapter 4

PREVIUOS STUDIES AND INTERVIEWS WITH THE AUDITORS

4.14.1 Previous StudiesPrevious Studies

4.24.2 Interviews with auditorsInterviews with auditors

38


4.1 PREVIOUS STUDIES

Statements on Auditing Standards by Mole Foryal:Statements on Auditing Standards by Mole Foryal:

Statements on Auditing Standards (SASs) are issued by the Auditing Statements on Auditing Standards (SASs) are issued by the Auditing

Standards Board (ASB), the senior technical body of the AICPAStandards Board (ASB), the senior technical body of the AICPA

designated to issue pronouncements on auditing matters applicable to thedesignated to issue pronouncements on auditing matters applicable to the

preparation and issuance of audit reports for nonissues. Rules 201 and 202preparation and issuance of audit reports for nonissues. Rules 201 and 202

of the of the AICPA Code of Professional ConductAICPA Code of Professional Conduct require an AICPA member require an AICPA member

who performs an audit of a nonissue to comply with standardswho performs an audit of a nonissue to comply with standards

promulgated by the ASB. The auditor should have sufficient knowledgepromulgated by the ASB. The auditor should have sufficient knowledge

of the SASs to identify those that are applicable to his or her audit andof the SASs to identify those that are applicable to his or her audit and

should be prepared to justify departures from the SASs.should be prepared to justify departures from the SASs.

Auditing Interpretations of SASs are interpretive publications pursuant Auditing Interpretations of SASs are interpretive publications pursuant

to to AU section 150AU section 150. Interpretive publications are recommendations on the. Interpretive publications are recommendations on the

application of SASs in specific circumstances, including engagements forapplication of SASs in specific circumstances, including engagements for

entities in specialized industries. Interpretive publications are issued underentities in specialized industries. Interpretive publications are issued under

the authority of the ASB. The auditor should identify interpretivethe authority of the ASB. The auditor should identify interpretive

39


publications applicable to his or her audit. If the auditor does not apply thepublications applicable to his or her audit. If the auditor does not apply the

auditing guidance included in an applicable interpretive publication, theauditing guidance included in an applicable interpretive publication, the

auditor should be prepared to explain how he or she complied with theauditor should be prepared to explain how he or she complied with the

SAS provisions addressed by such auditing guidance.SAS provisions addressed by such auditing guidance.

Auditors Expand Attack on Fraud by Margaret J. Tanney, CPA,Auditors Expand Attack on Fraud by Margaret J. Tanney, CPA, is a is a

Shareholder with Alpern Rosenthal. She can be reached atShareholder with Alpern Rosenthal. She can be reached at

[email protected]..

Numerous stories of financial statement fraud and alleged misconduct Numerous stories of financial statement fraud and alleged misconduct

have been covered in the media in the recent past including WorldCom,have been covered in the media in the recent past including WorldCom,

Xerox, Enron, Adelphia and Tyco, to name a few. To implementXerox, Enron, Adelphia and Tyco, to name a few. To implement

accounting reform and corporate accountability, the Congress passed andaccounting reform and corporate accountability, the Congress passed and

the President signed the Sarbanes-Oxley Act of 2002. While the Actthe President signed the Sarbanes-Oxley Act of 2002. While the Act

applies to public companies, closely-held businesses and not-for-profitapplies to public companies, closely-held businesses and not-for-profit

organizations have also been affected by the recent frauds.organizations have also been affected by the recent frauds.

At about the same time as the Sarbanes-Oxley Act was passed, the At about the same time as the Sarbanes-Oxley Act was passed, the

American Institute of Certified Public Accountants (AICPA) issued aAmerican Institute of Certified Public Accountants (AICPA) issued a

statement entitled Consideration of Fraud in a Financial Statement Auditstatement entitled Consideration of Fraud in a Financial Statement Audit

(Statement on Auditing Standards No. 99, SAS 99). The new set of rules is(Statement on Auditing Standards No. 99, SAS 99). The new set of rules is

40


just one component of the AICPA’s ongoing, comprehensive antifraud andjust one component of the AICPA’s ongoing, comprehensive antifraud and

corporate responsibility program. SAS 99 applies to all financial statementcorporate responsibility program. SAS 99 applies to all financial statement

audits, regardless of the type of entity (public company, closely-heldaudits, regardless of the type of entity (public company, closely-held

company, not-for-profit, etc.) being audited.company, not-for-profit, etc.) being audited.

While the new standard does not change the auditor’s responsibility forWhile the new standard does not change the auditor’s responsibility for

fraud detection, it does require the auditor to take extra steps to uncover it.fraud detection, it does require the auditor to take extra steps to uncover it.

SAS 99 will result in a substantial change in audit practice and moreSAS 99 will result in a substantial change in audit practice and more

effective audits as it requires the independent auditor to obtain a more in-effective audits as it requires the independent auditor to obtain a more in-

depth understanding of their clients, including its internal controls, todepth understanding of their clients, including its internal controls, to

identify the risks of material misstatements in the financial statements andidentify the risks of material misstatements in the financial statements and

determine what the clients are doing to mitigate those risks. Accountingdetermine what the clients are doing to mitigate those risks. Accounting

firm clients, bankers, users of audited financial statements as well as thefirm clients, bankers, users of audited financial statements as well as the

general public have increasing expectations on the ability of the externalgeneral public have increasing expectations on the ability of the external

auditor to detect fraud.auditor to detect fraud.

Whether you are a private business owner, a controller or a board memberWhether you are a private business owner, a controller or a board member

of a not-for-profit organization, this new audit standard will affect yourof a not-for-profit organization, this new audit standard will affect your

organization’s interaction with the audit team.organization’s interaction with the audit team.

41


Benefits of the new standardBenefits of the new standard

Implementing new audit procedures can be challenging and uncomfortable Implementing new audit procedures can be challenging and uncomfortable

at times. However, the new standard has some significant benefits forat times. However, the new standard has some significant benefits for

organizations. Examples include:organizations. Examples include:

oo Your auditors will discuss with management, owners and boards fraudYour auditors will discuss with management, owners and boards fraud

risk factors, both those related to fraudulent financial reporting (i.e.,risk factors, both those related to fraudulent financial reporting (i.e.,

cooking the books) and misappropriation of assets (i.e., stealing)cooking the books) and misappropriation of assets (i.e., stealing)

oo Based upon the information your auditors gather as a result of theBased upon the information your auditors gather as a result of the

expanded procedures called for in SAS 99, your auditors may:expanded procedures called for in SAS 99, your auditors may:

evaluate whether the programs and controls your organizationevaluate whether the programs and controls your organization

currently has in place address fraud risks factors identified and makecurrently has in place address fraud risks factors identified and make

recommendations to help your organization deter and detect fraud inrecommendations to help your organization deter and detect fraud in

order to prevent financial losses from misappropriation of assets.order to prevent financial losses from misappropriation of assets.

42


How the new standard affects the audit proceduresHow the new standard affects the audit procedures

The following are some of the effects an organization may notice The following are some of the effects an organization may notice

during the audit as the audit team applies the requirements of the newduring the audit as the audit team applies the requirements of the new

standard:standard:

oo Additional inquiries and communications by the audit team.Additional inquiries and communications by the audit team.

oo Additional emphasis on controls to prevent stealing, includingAdditional emphasis on controls to prevent stealing, including

controls over cash disbursements.controls over cash disbursements.

oo Examination of journal entries and other adjustments.Examination of journal entries and other adjustments.

oo Performance of a “retrospective review” of prior accounting estimatesPerformance of a “retrospective review” of prior accounting estimates

made by management for biases.made by management for biases.

oo Use of electronic testing approaches utilizing computer-assisted auditUse of electronic testing approaches utilizing computer-assisted audit

techniques designed to “mine” the source data for unusualtechniques designed to “mine” the source data for unusual

relationships and trends.relationships and trends.

oo Developing an understanding of the business rationale for significant,Developing an understanding of the business rationale for significant,

unusual transactions including related party transactions and majorunusual transactions including related party transactions and major

property sales and exchanges.property sales and exchanges.

43


oo Introduction of an element of “surprise” in the scope, timing andIntroduction of an element of “surprise” in the scope, timing and

extent of procedures performed.extent of procedures performed.

In conclusion, SAS 99 will have an impact on the way audits are done for In conclusion, SAS 99 will have an impact on the way audits are done for

private companies and non-profit organizations. However, CPAs are wellprivate companies and non-profit organizations. However, CPAs are well

qualified and trained to dig through financial records and ferret out the typequalified and trained to dig through financial records and ferret out the type

of information needed to draw conclusions about the existence of fraud — aof information needed to draw conclusions about the existence of fraud — a

valuable asset to any organization.valuable asset to any organization.

44


4.2 Interviews with auditors4.2 Interviews with auditors

Next are seven questions asked to the auditors including a question for Next are seven questions asked to the auditors including a question for

every assumption and then the answers for every question by the auditors.every assumption and then the answers for every question by the auditors.

The Questions:The Questions:

1-1- Is there any different between the mean of profit organization andIs there any different between the mean of profit organization and


2-2- Is there any different between accounting and accounting standardsIs there any different between accounting and accounting standards

for profit organizations and nonprofit organizations.for profit organizations and nonprofit organizations.

3-3- Is there any different between the audit standards used in profit andIs there any different between the audit standards used in profit and


4-4- Is there any different between audit procedures used in audit on profitIs there any different between audit procedures used in audit on profit


5-5- Is there any different between documents used in the profitIs there any different between documents used in the profit


6-6- Is there any different between financial statements for profit andIs there any different between financial statements for profit and


45


7-7- Is there any different between the low used in profit organizations andIs there any different between the low used in profit organizations and


Answers by the sample of auditorsAnswers by the sample of auditors

→→ PHD Iskander Nashwan , The chief of the board of director for thePHD Iskander Nashwan , The chief of the board of director for the

Palestinian society of certified public accountants.Palestinian society of certified public accountants.

1. I think that the different can be in the goal of them, profit organization

goal is to make profit and benefits but non-profit organization goal is

to help people.

2. Yes the different in accounts uses, example: revenues in the profit

happen by selling goods or services, but in nonprofit revenues can be

donations. In accounting standards the difference can be in the cash

base.

3. No there is no difference in audit standards.

4. Yes, audit procedures differ between the profit organizations and

nonprofit organization and I can say It differ between all the

organizations which make and which don't make profit.

5. Documents used in every organization has to be different because of

the nature of everyone.

46


6. Financial statements for profit is the income and balance sheet and

sometimes cash flows but in nonprofit is profit and loss account and

the change in the net assets and liabilities.

7. We have different lows for every organization in the country not just

for profit and nonprofit organizations.

→ AUDITOR…

1. Of course there is a big difference between them, every kind of

business has a difference with others and when we talk about

difference between profit and nonprofit organizations we have to take

in consideration the goal and the components of these organizations,

profit organizations has its goal in making profit but nonprofit has its

goal to be helpful for the society.

2. The difference can be mainly in the inventory, no inventory in the

nonprofit organization and the international standards talk about

inventory which has no relation with nonprofit organization.

3. Because the audit standards that depend on the auditor I think there is

no difference.

4. The audit procedures differ in the three stages planning,

implementation and in the resulting.

47


5. Profit organization can be trade, industrial, row materiality and

service and it depend on the accrual basis but in the nonprofit

organization id depend on cash basis which make the documents

differ.

6. Every organization has its financial statements.

7. The profit organizations depending on the organizations low which

established in 1930 and it’s work until now, but there is a new low for

the nonprofit organizations which established in 2009.

→ AUDITOR…

1. Profit organization is an organization that going to make profit and to

decline unemployment but nonprofit organization can't be profit

organizations.

2. When we talk about organizations we have to take in our

consideration that every kind of businesses have a different with other

organizations not just profit organizations and nonprofit organizations.

The profit and nonprofit organization depending on many same

international standards for accounting and differ in some.

3. I don't think that there is any relation make different between audit

standards in the profit and nonprofit organizations.

48


4. The audit procedures different between all kinds of companies which

are profit so it will be different with the nonprofit organization.

5. Documents differ specially in nonprofit organizations because its

documents depend on the low in the country it has its activities in so

the documents differ.

6. The name of financial statements maybe the same but what it contain

is the difference.

7. Every organization has its Palestinian low and the same thing is for

profit and nonprofit organizations.

→ AUDITOR…

1. Every kind of these organizations has its definition, profit

organization is organization that has its work maybe industrial, service

or trade and nonprofit organization work in help boor people, making

projects to decline unemployment and so on.

2. Yes in profit organization there is trade or service to make profit but

in the nonprofit the service is not to make profit so the accounting will

be different. International accounting standards contain the standards

used to account for profit and nonprofit and maybe the difference can

just be in the cash base use to account for them.

49


3. The audit standards don't make any difference in these two types of

organizations.

4. The three stages of audit procedures can be different because planning

in profit organizations is to make profit and in nonprofit is to help

society, so the supplier will different so the procedure on audit on it

will differ.

5. The main different can be in the nature of every organization, profit

make profit so there is sales invoices and service invoices but

nonprofit it’s name is no profit so it just make expenses which in the

money voucher.

6. In profit organization there are many statements like profit loss,

balance sheet and cash flow. Nonprofit organization has profit and

loss and has change in net assets.

7. Of course the different lows for profit organizations and nonprofit

organizations.

50


→ AUDITOR…

1. Yes there is a difference and it's a big difference so clear and so easy

to tell about.

2. Yes, and an example is when you talk about capital we can't make an

entry which contain capital because there is no capital. International

accounting standards clear the difference in accounting for every type

of organizations.

3. I think that there is no difference.

4. The procedures differ in all its aspects.

5. Of course the documents different.

6. Financial statements used in profit and nonprofit organizations differ

because of the nature of this organizations, profit organizations

contain capital but there is no capital in nonprofit organizations there

is surplus or deficit on net assets and liabilities.

7. Yes, every organization has its low.

51


→ AUDITOR…

1. Oh, yeah the difference can be mainly in the goal of every type of

these organizations.

2. For most people the accounting for profit and nonprofit organization

is the same but it isn't, revenues in profit organization made by sell

but in nonprofit made by receiving donations and for another example

accounting for debtors and creditors, there are big different between

the debtors and creditors for such profit and nonprofit organizations.

3. The difference can be in accounting standards but in audit standards

there is no difference.

4. I Think the Stages In every Procedure which differs but the mail

procedures didn’t differ.

5. Profit organization use purchases, orders and sales invoices but

nonprofit organization use money vouchers for purchase payment

voucher and for receipt use receipt voucher.

52


6. The financial statements for profit organizations are income

statement, trade, balance sheet and cash flow. But in nonprofit

organizations there are profit and loss account and change in net

assets and liabilities.

7. Profit organizations has a low work with in Gaza applied in 1930 and

it work until now, and nonprofit organizations has a low applied in

2009.

→ AUDITOR…

1. Maybe the different is in the objective of every organization, profit

organization objective is to make the profit, the money, but nonprofit

objective is to help people by many ways.

2. On the one hand, accounting for these organizations differs because of

the difference of the mean, the goal and the projects of every

organization. And on the other hand there are some international

accountings standards are the same in these organizations and there

are some are not the same.

3. The standards of audit talk about the general rules to audit and these

rules can't be differing between all kinds of organization.

53


4. The audit procedures differ between accounting on profit and on

nonprofit organizations.

5. The nature of every organization make the documents differ.

6. I think there is big different in statements used for profit and nonprofit

organizations, profit organization search for profit and the statements

used explain its profit like income statement and also it explain the

shape of his position if he has liabilities or how much is his capital as

in balance sheet. But the financial statements for nonprofit explain the

revenues and where is it gone like in the profit and loss account, so it

differ.

7. Yes there is low for profit organizations and low for nonprofit

organization.

→ AUDITOR…

1. Profit organizations are a business which it's job to create money and

nonprofit is an organization that make projects to develop the country.

2. Accounting for profit organization depending on the modified accrual

base but accounting for nonprofit organization depending on the cash

base, so accounting for profit organization differ with accounting for

54


nonprofit organization and by the same thing there are some of the

international accounting standards with is the same and others differ.

3. No there is no difference; you know the audit standards depend on the

auditor himself and on the work field.

4. Every procedure in audit procedures has its nature which differ

between profit and nonprofit.

5. Profit organization use accrual basis and nonprofit use cash basis and

every base have its documents.

6. Many people think that the financial statements for the nonprofit

account stopped on the profit and loss account or on the change in net

assets and liabilities, but that’s wrong because now we have special

purpose statements for activities and projects like activity statement.

But from many years there is no mainly change in the financial

statements for the profit organizations which are Income statement,

balance sheet and cash flow.

7. The main effective differences which make the low differ is the base

that every organization depend on.

→ AUDITOR…

55


1. Many differences, first different is in the internal system, second in

the goal, third in the documents used, forth is in the nature of the

work.

2. Yes accounting is different for the organizations, differ because they

differ in mean, documents, statements, objectives , differ in

everything so of course the accounting will differ and of course it will

differ in the international accounting standards because the accounting

itself differ.

3. I don't see any different between these standards among these

organizations.

4. Because the first audit procedure is planning and its differ between

profit and nonprofit so the next procedures has to be differ because its

depending on the planning which is implementation and resulting.

5. The low use in the country for every organization element the

documents to use specially in the nonprofit organization.

6. Profit organizations have its financial statements and the nonprofit

organizations have its financial statements.

7. Yes there is a different low.

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→ AUDITOR…

1. Nonprofit organization established by persons who want to improve

the society by many projects such as food baskets, support boor

families, help students… etc., but profit organization has many kinds

such as industrial, trade, service and all these profit organizations has

the goal to make profit.

2. The difference mainly is in the cash base maybe, and so on in the

international accounting standards but international accounting

standards some of it are the same like exchange foreign currency.

3. There is no difference because audit standards can be as a general

rules to audit and not a specific rule.

4. The audit procedures differ in all its aspects.

5. Yes it differs between these different kinds of organization.

6. I think that the financial statements for profit organizations are income

statement and balance sheet, but for nonprofit organizations there are

profit and loss statement and change in net assets and liabilities

statement.

7. The low for profit organization is the corporations but for nonprofit is

the low for social associations.

57


Chapter 5

Results and Recommendations

58


Through our Interviews with the auditors, illustrated that our assumptions Through our Interviews with the auditors, illustrated that our assumptions

improved as shown follows:improved as shown follows:

1-1- There is a different between the mean of profit organization andThere is a different between the mean of profit organization and


oo The entire sample agreed that there is a difference between the meanThe entire sample agreed that there is a difference between the mean

of profit organization and nonprofit organization.of profit organization and nonprofit organization.

2-2- There is a different between accounting for profit organizations andThere is a different between accounting for profit organizations and


oo Through the standards used and the procedures of book keeping forThrough the standards used and the procedures of book keeping for

each organization.each organization.

3-3- There is a difference between the accounting standards used in profitThere is a difference between the accounting standards used in profit


59


oo The entire sample agreed that there is a difference between accountingThe entire sample agreed that there is a difference between accounting

standards for profit and nonprofit organization.standards for profit and nonprofit organization.

4-4- There is no any difference between the audit standards used in profitThere is no any difference between the audit standards used in profit


oo All The Sample agreed that there is no difference between theAll The Sample agreed that there is no difference between the

auditing standards used in profit and nonprofit organization becauseauditing standards used in profit and nonprofit organization because

the auditing standards depend on the auditor his self.the auditing standards depend on the auditor his self.

5-5- There is a difference between audit procedures used in audit on profitThere is a difference between audit procedures used in audit on profit


oo All the sample agreed that there is a difference between all stages inAll the sample agreed that there is a difference between all stages in

the audit procedures. the audit procedures.

6-6- There is a difference between documents used in the profitThere is a difference between documents used in the profit


oo All The Auditors in the sample agreed that there is a differenceAll The Auditors in the sample agreed that there is a difference

between documents used in the profit and nonprofit organization. between documents used in the profit and nonprofit organization.

7-7- There is a different between financial statements for profit andThere is a different between financial statements for profit and


oo The entire sample agreed with the differences in the financialThe entire sample agreed with the differences in the financial

statements used in the two types of organizations.statements used in the two types of organizations.

60


8-8- There is a difference between the law used in profit organizations andThere is a difference between the law used in profit organizations and


oo The entire sample agreed that every organization has its law.The entire sample agreed that every organization has its law.

Recommendations:Recommendations:

I.I. We recommend the creation of a Palestinian law for profitWe recommend the creation of a Palestinian law for profit

corporations and applied to suit the needs of the Palestiniancorporations and applied to suit the needs of the Palestinian

companies especially in this volatile economy.companies especially in this volatile economy.

II.II. We recommend the creation of periodical conference for auditorsWe recommend the creation of periodical conference for auditors

to discuss the latest developments in the auditing field.to discuss the latest developments in the auditing field.

III.III. We recommend the expanding the scope of the PalestinianWe recommend the expanding the scope of the Palestinian

auditing standards to include more and more the non-profitauditing standards to include more and more the non-profit

companies.companies.

61


IV. Re-assess the ability of the auditor in the Gaza Strip on the workRe-assess the ability of the auditor in the Gaza Strip on the work

of the auditing professionof the auditing profession.

62


References:References:

1.1. www.Acc4arab.com www.Acc4arab.com العرب المحاسبون العرب موقع المحاسبون موقع

2.2. www.auditnet.orgwww.auditnet.org

3.3. Wikipedia The Free encyclopediaWikipedia The Free encyclopedia

4.4. www.pacpa.pswww.pacpa.ps

5.5. http://www.met.gov.ps/DesktopDefault.aspx?lng=2http://www.met.gov.ps/DesktopDefault.aspx?lng=2 االقتصاد وزارة االقتصاد موقع وزارة موقع

الفلسطينيةالفلسطينية

6.6. http://sqarra.wordpress.comhttp://sqarra.wordpress.com القرا صالح القرا مدونة صالح مدونة

7.7. www.acfgaza.co.ccwww.acfgaza.co.cc الفلسطيني المحاسب الفلسطيني منتدى المحاسب منتدى

8.8. www.arabo.comwww.arabo.com العرب والمراجعون المحاسبون جمعية العرب موقع والمراجعون المحاسبون جمعية موقع

9.9. www.accountingeducation.com

10.10. www.pwc.comwww.pwc.com

11.11. www.deloitte.comwww.deloitte.com

12.12. وآخرون وهبة عمرو الحسابات، تدقيق وآخرون علم وهبة عمرو الحسابات، تدقيق علم

13.13. International Accounting Standers (IAS), presentation of financial International Accounting Standers (IAS), presentation of financial

statements. statements.

63

http://www.deloitte.com/

http://www.pwc.com/

http://www.accountingeducation.com/

http://www.arabo.com/

http://www.acfgaza.co.cc/

http://sqarra.wordpress.com/

http://www.met.gov.ps/DesktopDefault.aspx?lng=2

http://www.auditnet.org/

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