Present Value from Auditing Perspective

2343 comprehensive income approach is good news for auditing, but of course, it is not true. The new approach introduces new assets which has value but not has physical materiality. This fact means that auditing must develop new tools for these equivocal assets but we cannot assert we have such dependable tools now. After the World War , Japanese audit practice and standards always has followed US one. This fact makes the Japanese auditing falling into ―minor‖ field, but such situation is now changing because many recently detected fraud cases highlighted the role of auditing. These audit circumstance are common in the world like Enron affair in the U.S. or BCCI, Barings and Palmalat cases in Europe. Apparently, in these cases, complicatedly produced new types of assets are related to the fraud, and audit decision was deluded in some cas es. From auditing viewpoint, traditional accounting concepts are still important and practical. When we will continue to introduce present value and the related accounting practice, the notion of them must be re-examined like four forms in this paper, and show the way to yield hard auditable amount of assets. In 2344 [Form 1] and [Form 2], we should obtain reliable rule to allocate cost. Because managements arbitrariness intervene in [Form 1] and [Form 2] inevitably, auditors might not find firm allocation bases. [Form 3] heavily depends on calculation model, so auditors should also confirm the justice of the used model. It means that even if the result of the calculation itself is correct, the ambiguous constituents or assumptions of the model might influence on the fairness of the result. In this form, auditors should verify the objectivity of the model used. The fair value approach of [Form 4] requires auditors to find the evidence of fair value. Market often offers the fair value that everyone easily disti nct, but there are some cases that no reliable market exists. Auditors may face same difficulties of [Form 3] in these cases. Historical cost accounting has been offered hard evidence for auditors. With fair value accounting, however, auditors should seek alternative evidence which take place of the past transaction record.

8. The Necessity of Flow and Internal Aspects in Japan

2345 In accounting, there are two functions to maintain the order of our society. One is the function to provide decision useful information for investors. This is called as operational accounting. The other function is to reconcile interests among stakeholders. This function is called as equity stewardship accounting. There are three main laws regulating accounting systems in Japan: The Corporation Law former name: Commercial Code, The Financial Products Exchange Law former name: Stock and Exchange Law, and The Corporation Tax Law. These laws have their own purpose of preparing financial statements financial reporting. The main purpose of Financial Products Exchange Law is to provide decision useful information to investors. Financial statements prepared by this law have been affected by international accounting standards. The main purpose of Corporation Law is to reconcile the interests between stakeholders and to protect creditor through the calculation of distributable amount of surplus. The main purpose of corporation tax law is to maintain the equity of taxation through the calculation of fair income. But each law regulates accounting practice