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NATURE OF
THE ENGAGEMENT
1. Subjects of
the engagement
All types of “official
accounting works” and
“operational accounting
works” are within the
coverage of this
engagement. “Official
accounting works”
cover responsibilities
determined by
legislation, including
the responsibility of
having tax and social
insurance returns signed
by a public accountant.
“Operational
accounting works”
are such kind of works
explained in the
following paragraph.
List of official
accounting works is
identical in almost all
entities. List of
operational accounting
works is determined by
the peculiar conditions(1)
of each entity.
Operational accounting:
The term is used to
describe those
accounting principles
and procedures which are
not imposed by
legislation but put into
effect by the management
for the purpose of
facilitating financial
management and conduct
of operations. For
example; (a) Using, for
various reasons(2),
some sub accounts,
although using
determined main accounts
is sufficient to meet
the official conditions.
(b) Preparation of
financial statements(3)
for periods shorter than
a quarter, although
quarterly financial
statements are
sufficient to meet
official conditions. (c)
Preparation of financial
statements which
incorporates more detail(4)
than officially
required. (d)
Preparation of financial
reports(5)
other than official
financial statements.
This engagement,
naturally, includes our
“tax and other financial
legislation consultancy”
engagement to a great
extent.
2. Our studies
within the engagement:
First of all, we develop
our recommendation
concerning “the most
convenient list of
operational accounting
works” for our clients,
and make said list
definite by receiving
our clients’ approval
throughout discussions
with them.
In connection with the
works on said list, we
conduct studies,
depending on the choice
of our clients, ranging
from “monitoring and
giving direction to
these works” to
“execution of these
works” including
establishment of
necessary systems.
3. Enhanced
engagement
[a DEFINITE SOLUTION
service package]
We provide our clients
with a service package
which includes subjects
and studies within the
context of this
engagement together with
some or all of the
subjects and studies
within our “financial
management consultancy”
engagement.
Footnotes:
(1) Features
of the industry and
business, management
philosophy, size,
organization structure,
etc.
(2) For example;
comparison of planned
performance with actual
results, preparation of
reports said in
footnotes 4-5.
(3) Main
financial statements:
balance sheet, income
statement; Other
financial statements:
statement of cost of
sales, funds statement,
statement of profit
appropriation, statement
of changes in equity.
(4) For
example; preparation of
balance sheet as to show
currency positions,
preparation of income
statement for
departments, etc.
(5) For
example; reports showing
the breakdown of
receivables and payables
as to maturity dates,
customer profitability
reports, product or
service profitability
reports, etc.
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