TABLE OF CONTENTS

Page

Introduction 2

Chapter 1: Research Proposal 3

Chapter 2: Research in Theory 7

Chapter 3: Differences between profit and nonprofit organizations 16

Chapter 4: Previous Studies & Interviews with the Auditors 31

Chapter 5: Results And Recommendations 48

References 51

1
 Introduction

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

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

science and technology And the spread of trade across the world It has

become necessary and important to find the science of financial

operations that made every second.

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

spread of companies across the world and the presence of multinational

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

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

Auditing.

Audit is an examination and verification of a company's financial and

accounting records and supporting documents by a professional, such as a

Certified Public Accountant.

Auditing become the first science that make the owner and the donor feel

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

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

which is " Comparative Study Between Audit On Profit Organizations

And Audit On Non-profit Organizations. "

Finally ,We hope Allah The Success In

2
Chapter 1: Research Proposal

Research Title :

Comparative Study Between Audit On Profit Organizations And Audit

On Non-profit Organizations.

Research Problem:

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

that there is no difference between audit on profit and nonprofit

organizations 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 On Non-profit Organizations"

Assumption:

Yes, There Is A big Difference Between Audit On Profit Organizations

And Audit On Non-profit Organizations.

Research Hypotheses:

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

and nonprofit organization.

3
 2- There is a different between accounting for profit

organizations and nonprofit organizations.

3- There is a difference between the accounting standards used

in profit and nonprofit organization.

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

in profit and nonprofit organization.

5- There is a difference between audit procedures used in audit

on profit and nonprofit organization.

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

organization and nonprofit organization.

7- There is a different between financial statements for profit

and nonprofit organizations.

8- There is a difference between the low used in profit

organizations and nonprofit organizations.

Research objectives:

1- Differentiate between the mean of profit organization and

nonprofit organization.

2- Differentiate between accounting for profit organizations

and nonprofit organizations.

4
 3- Differentiate the accounting standards used in profit and

nonprofit organization.

4- Differentiate between the audit standards used in profit and

nonprofit organization.

5- Differentiate between audit procedures used in audit on

profit and nonprofit organization.

6- documents used in the profit organization and nonprofit

organization.

7- Differentiate between financial statements for profit and

nonprofit organizations.

8- Differentiate between the low used in profit organizations

and nonprofit organizations.

The Importance Of The Study:

This Study Shows Similarities and differences between audit on profit

organizations and non profit organizations which gives the answers to

many questions among people in general and especially among

accountants on the relationship between profit and non profit

organizations, the extent of the differences between them, procedures

used on accounting and audit and ending with financial statements.

5
Research Methodology:

1- Source of Data Collection:

Using Primary and Secondary Sources:

Primary: Interviews with Auditors.

Secondary: Data Collected From Previous studies.

2- Research Sample:

Five Audit Offices and 10 Companies including Profit And nonprofit

Companies.

Determinants Of Research:

Companies and audit Offices among Gaza Strip Because Of the Israeli

restrictions.

6
Chapter 2:

Research in Theory:

Audits are performed to ascertain the validity and reliability of

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

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 test basis.

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

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

statistical sampling is often adopted in audits. In the case of financial

audits, a set of financial statements are said to be true and fair when they

are free of material misstatements - a concept influenced by both

quantitative (numerical) and qualitative factors.

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

associated with gaining information about financial systems and the

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

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

information systems performance, and environmental concerns. With

nonprofit organizations and government agencies, there has been an

increasing need for performance audits, examining their success in

satisfying mission objectives. As a result, there are now audit

7
professionals who specialize in security audits, information systems

audits, and environmental audits.

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

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

management. It is performed by competent, independent and objective

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

the results of the audit.

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

or 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, means a systematic and accurate verification of the cost accounts

and records, and checking for adherence to the cost accounting

objectives. According to the Institute of Cost and Management

Accountants of Pakistan, a cost audit is "an examination of cost

accounting records and verification of facts to ascertain that the cost of

the product has been arrived at, in accordance with principles of cost

accounting."

An audit must adhere to generally accepted standards established by

governing bodies. These standards assure third parties or external users

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

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

8
The Definition for Auditing and Assurance Standard (AAS) 1 by ICAI -

"Auditing is the independent examination of financial information of any

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

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

an opinion thereon

Types of auditors (12)

Auditors of financial statements can be classified into two categories:

• External auditor / Statutory auditor is an independent Public

accounting firm engaged by the client subject to the audit, to

express an opinion on whether the company's financial statements

are free of material misstatements, whether due to fraud or error.

For publicly-traded companies, external auditors may also be

required to express an opinion over the effectiveness of internal

controls over financial reporting. External auditors may also be

engaged to perform other agreed-upon procedures, related or

unrelated to financial statements. Most importantly, external

auditors, though engaged and paid by the company being audited,

are regarded as independent auditors.

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

American Institute of Certified Public Accountants; and the ISA

9
International Standards on Auditing developed by the International

Auditing and Assurance Standards Board of the International Federation

of Accountants

• Internal auditors are employed by the organization they

audit. They perform various audit procedures, primarily related to

procedures over the effectiveness of the company's internal

controls over financial reporting. Due to the requirement of Section

404 of the Sarbanes Oxley Act of 2002 for management to also

assess the effectiveness of their internal controls over financial

reporting (as also required of the external auditor), internal auditors

are utilized to make this assessment. Though internal auditors are

not considered independent of the company they perform audit

procedures for, internal auditors of publicly-traded companies are

required to report directly to the board of directors, or a sub-

committee of the board of directors, and not to management, so to

reduce the risk that internal auditors will be pressured to produce

favorable assessments.

The most used Internal Audit standards are those of the Institute of

Internal Auditors

10
 • Consultant auditors are external personnel contracted by the

firm to perform an audit following the firm's auditing standards.

This differs from the external auditor, who follows their own

auditing standards. The level of independence is therefore

somewhere between the internal auditor and the external auditor.

The consultant auditor may work independently, or as part of the

audit team that includes internal auditors. Consultant auditors are

used when the firm lacks sufficient expertise to audit certain areas,

or simply for staff augmentation when staff are not available.

Audit History (12)

Egyptians recorded in history as first people who work and develop

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

books for controlling the revenues and expenses.

The history record that both Greece and Egypt governments were using

accounting and auditing to ensure the truth of accounts.

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

word "Auditing" derived from Latina word "Audire" that means

listening.

11
Then in fifteenth century the double entry method discovered, that lead

the implementation of auditing more than easy and spread that lead to

develop auditing job.

As result for industry revluation and trading progress in Europe to

establish huge projects and reason which help to develop auditing job and

increase demand for auditing services, in which limited corporations

established.

Economic and industrial progress lead to establish limited corporations

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

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

Spread between management and property increase the demand on

auditing services to protect owners behalf.

The taxation and financial polices were playing important rule in auditing

developing.

As shown before we note increase demand on auditing services, the

professional organizing movement discovered in UK in 1854 then in

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

Australia 1904, Finland 1911.

The increase of auditing services demand lead to establish associations to

organize.

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

12
 1- American Institute of Certified Public Accountants (AICPA)

-USA

2- Citified Public Accountants (APAS) - USA

3- Financial Accounting Standers Board (FASB) - USA

4- Internal Revenue Services (IRS) – USA

5- The Institute of Chartered Accountants (ICA) - UK

6- The Association at Certified Accountants (ACCA)-UK

Importance of Audit (12)

There are many groups depend on Auditor report for make specific

decisions such as customers, management, banks and governmental

bodies.

A- Importance of Audit for Customer:

1-main source of information through audited financial statements.

2- Basic to get loans from banks.

3- Basic for additional investments.

4- Basic for prepare taxation statements.

5- Basic to ensure of fairness of financial position.

B- Importance of Audit for management:

13
 Management depend completely upon accounting data, in planning

and take suitable decisions, and evaluate it.

C- Importance of Audit for Banks:

Audited Financial statement depend on Auditor report to analyze

statements before provide loans, and depended as basic to

determine degree of risk.

D- 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

Auditing Objectives (12)

Auditing objectives improved as result of many reasons in the last

period.

Lobas sentence " Auditor is watch-dog not a blood hoverd "

We can determine Auditing Objectives in two main groups

traditional and modern.

1-Traditional objective: classify into main and secondary

a- Main objectives:

14
 - ensure of truth of financial statements

- express independent opinion

b- Secondary objectives:

- discover fraud.

- used in planning and polices.

- ensure of fairly of financial statements.

- determine tax amounts.

- submit various reports.

2- Modern objectives:

a-control the plan and follow-up it's executes and the range of

goals achievement.

b- Asses activities results.

c- Achieve maximize range of efficiency and effective.

d-Achieve maximize range of comfortable for society.

15
Chapter 3: Differences between profit and nonprofit organizations:

 Means of profit and nonprofit organization:

Profit organization

Organizations interact through various markets to achieve profit and to

maximize share holders wealth, profit organization classified into three

categories':

a- proprietorship: organization owned by one person, he and

just he has the authority to make anything, the organization end if

he die.

b- Partnership: organization owned by two or more persons

this organization also provide goods and services to a chive profit.

c- Corporations: organization owned by many persons

accordance to quota of shares for each one, each one has

responsibility to his shares.

Nonprofit organization:

Organization does not have share holders it may have members, it may be

association. The organization may be controlled by it's members who

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

16
have delegate structure to allow for the representation of groups as

members.

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

the society.

 Law between profit and nonprofit:

1-Profit organization:

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.

2- 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 on nonprofit organization

(commonwealth laws, European Union nonprofit laws).

17
 Financial statements: (13)

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:

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.

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.

Statement of retained earnings: explains the changes in a company's

retained earnings over the reporting period.

Statement of cash flows: reports on a company's cash flow activities,

particularly its operating, investing and financing activities.

18
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." 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

19
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.

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.

20
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).

 Internal System:

1- 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.

21
 Board of
Director

General
Manager

Financial Marketing Production Employees

Management Management Management Affairs

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

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).

22
 Board of
Director

Financial Services
Management Management

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)

 Documents used in the profit organization and nonprofit

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

23
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.

 Accounting Standards Between profit organizations 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 an

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.

24
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.

 Audit standards used in profit and nonprofit organization.

There Is No Differences Between Audit Standards Used In Profit And

Non Profit Organizations Because All of it depend on the auditor

personality. And here is The Generally Accepted Audit Standards:

General Standards

1. The auditor must have adequate technical training and

proficiency to perform the audit.

2. The auditor must maintain independence in mental attitude

in all matters related to the audit.

25
 3. The auditor must use due professional care during the

performance of the audit and the preparation of the report.

Standards of Field Work

1. The auditor must adequately plan the work and must

properly supervise any assistants.

2. The auditor must obtain a sufficient understanding of the

entity and its environment, including its internal control, to assess

the risk of material misstatement of the financial statements

whether due to error or fraud, and to design the nature, timing, and

extent of further audit procedures.

3. The auditor must obtain sufficient appropriate audit evidence

by performing audit procedures to afford a reasonable basis for an

opinion regarding the financial statements under audit.

Standards of Reporting

1. The auditor must state in the auditor's report whether the

financial statements are presented in accordance with generally

accepted accounting principles.

2. The auditor must identify in the auditor's report those

circumstances in which such principles have not been consistently

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

26
 3. When the auditor determines that informative disclosures are

not reasonably adequate, the auditor must so state in the auditor's

report.

4. The auditor must either express an opinion regarding the

financial statements, taken as a whole, or state that an opinion

cannot be expressed, in the auditor's report. When the auditor

cannot express an overall opinion, the auditor should state the

reasons therefore in the auditor's report. In all cases where an

auditor's name is associated with financial statements, the auditor

should clearly indicate the character of the auditor's work, if any,

and the degree of responsibility the auditor is taking, in the

auditor's report.

 Audit procedures used in audit on profit and nonprofit

organization.

Audit procedures are summarized as follows with Differentiate

between profit organization procedures and nonprofit organization

procedures in every step.

1. 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

27
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 differ because of the nature of the accounts

used.

2. 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 Organization have its internal control which can be

suitable for the uses of every type.

3. 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 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

28
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 differ by the nature of

organization projects and organization members.

4. 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 and Non-Profit Organization because

This Stage Depend On The auditor size of the work not on the kind

of it.

5. 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 be harder to understand and check.

29
 6. Auditor's Report:

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.

30
Chapter 4:

Previous Studies & Interviews with the Auditors:-

This Chapter includes the previous studies and interviews with the

sample of auditors and their accepting or refusing the assumptions of the

research.

• Previous Stidies:

1- Statements on Auditing Standards by Mole Foryal:

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

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

designated to issue pronouncements on auditing matters applicable to the

preparation and issuance of audit reports for nonissuers. Rules 201 and

202 of the AICPA Code of Professional Conduct require an AICPA

member who performs an audit of a nonissuer to comply with standards

promulgated by the ASB. The auditor should have sufficient knowledge

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

should be prepared to justify departures from the SASs.

Auditing Interpretations of SASs are interpretive publications pursuant to

AU section 150. Interpretive publications are recommendations on the

application of SASs in specific circumstances, including engagements for

31
entities in specialized industries. Interpretive publications are issued

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

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

the auditing guidance included in an applicable interpretive publication,

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

the SAS provisions addressed by such auditing guidance.

2- Auditors Expand Attack on Fraud by Margaret J. Tanney,

CPA, is a Shareholder with Alpern Rosenthal. She can be reached

at mtanney@alpern.com.

Numerous stories of financial statement fraud and alleged misconduct

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

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

accounting reform and corporate accountability, the Congress passed and

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

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

organizations have also been affected by the recent frauds.

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

American Institute of Certified Public Accountants (AICPA) issued a

statement entitled Consideration of Fraud in a Financial Statement Audit

32
(Statement on Auditing Standards No. 99, SAS 99). The new set of rules

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

and corporate responsibility program. SAS 99 applies to all financial

statement audits, regardless of the type of entity (public company,

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

While 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. SAS 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-

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

identify the risks of material misstatements in the financial statements

and determine what the clients are doing to mitigate those risks.

Accounting firm clients, bankers, users of audited financial statements as

well as the general public have increasing expectations on the ability of

the external auditor to detect fraud.

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

member of a not-for-profit organization, this new audit standard will

affect your organization’s interaction with the audit team.

Benefits of the new standard

33
Implementing new audit procedures can be challenging and

uncomfortable at times. However, the new standard has some significant

benefits for organizations. Examples include:

• Your auditors will discuss with management, owners and boards

fraud risk factors, both those related to fraudulent financial

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

(i.e., stealing)

• Based upon the information your auditors gather as a result of the

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

evaluate whether the programs and controls your organization

currently has in place address fraud risks factors identified and

make recommendations to help your organization deter and detect

fraud in order to prevent financial losses from misappropriation of

assets

How the new standard affects the audit procedures

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

the audit as the audit team applies the requirements of the new standard:

• Additional inquiries and communications by the audit team

• Additional emphasis on controls to prevent stealing,

including controls over cash disbursements

34
 • Examination of journal entries and other adjustments

• Performance of a “retrospective review” of prior accounting

estimates made by management for biases

• Use of electronic testing approaches utilizing computer-

assisted audit techniques designed to “mine” the source data for

unusual relationships and trends

• Developing an understanding of the business rationale for

significant, unusual transactions including related party

transactions and major property sales and exchanges

• Introduction of an element of “surprise” in the scope, timing

and extent of procedures performed

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

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

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

type of information needed to draw conclusions about the existence of

fraud — a valuable asset to any organization.

• Interviews with auditors:

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

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

35
The Questions:

1- Is there any different between the mean of profit

organization and nonprofit organization.

2- Is there any different between accounting and accounting

standards for profit organizations and nonprofit organizations.

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

profit and nonprofit organization.

4- Is there any different between audit procedures used in audit

on profit and nonprofit organization.

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

organization and nonprofit organization.

6- Is there any different between financial statements for profit

and nonprofit organizations.

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

organizations and nonprofit organizations.

Answers by the sample of auditors:

 PHD Iskander Nashwan , The chief of the board of director

for the 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.

36
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.

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.

 xxxxx:

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

every kind of business has a difference with others and when

37
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.

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

38
 until now, but there is a new low for the nonprofit

organizations which established in 2009.

xxxxx:

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.

39
4. The audit procedures different between all kinds of companies

which is profit so it will be different with the nonprofit

organization.

5. Documents differ specially in nonprofit organizations because it’s

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.

xxxx:

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

40
 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.

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.

41
xxxxx:

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.

xxxxx:

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

these organizations.

42
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 differ 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.

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.

43
xxxx:

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 differ because

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

organization. And on the other hand there are some international

accounting 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.

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

44
 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.

xxxxx:

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 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.

45
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 has 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 the 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 difference which make the low differ is the base

that every organization depend on.

xxxxx:

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.

46
 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 lows.

xxxxx:

1. Nonprofit organization established by persons who want to

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

47
 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 differ 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.

48
Chapter 5:

Results And Recommendations

Through our Interviews with the auditors, illustrated that our assumptions

improved as shown follows:

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

and nonprofit organization.

 All the sample agreed that there is a difference between the

mean of profit organization and nonprofit organization.

2- There is a different between accounting for profit

organizations and nonprofit organizations.

 Through the standards used and the procedures of book

keeping for each organization.

3- There is a difference between the accounting standards used

in profit and nonprofit organization.

 All the sample agreed that there is a difference between

accounting standards for profit and nonprofit organization.

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

in profit and nonprofit organization.

 All The Sample agreed that there is no difference between

the auditing standards used in profit and nonprofit organization

because the auditing standards depend on the auditor his self.

49
5- There is a difference between audit procedures used in audit

on profit and nonprofit organization.

 All the sample agreed that there is a difference between all

stages in the audit procedures.

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

organization and nonprofit organization.

 All The Auditors in the sample agreed that there is a

difference between documents used in the profit and nonprofit

organization.

7- There is a different between financial statements for profit

and nonprofit organizations.

 All the sample agreed with the differences In the financial

statements used in the two types of organizations.

8- There is a difference between the low used in profit

organizations and nonprofit organizations.

 All the sample agreed that every organization has its low.

50
Recommendations:

1. We recommend the creation of a Palestinian law for profit

corporations and applied to suit the needs of the Palestinian

companies especially in this volatile economy.

2. We recommend the creation of periodical conference for

auditors to discuss the latest developments in the auditing

field.

3. We recommend the expanding the scope of the Palestinian

auditing standards to include more and more the non-profit

companies.

4. Re-assess the ability of the auditor in the Gaza Strip on the

work of the auditing profession.

51
References:

1. www.Acc4arab.com ‫موقع المحاسبون العرب‬

2. www.auditnet.org

3. Wikipedia The Free encyclopedia

4. www.pacpa.ps

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

‫وزارة القتصاد الفلسطينية‬

6. http://sqarra.wordpress.com ‫مدونة صالح القرا‬

7. www.acfgaza.co.cc ‫منتدى المحاسب الفلسطيني‬

8. www.arabo.com ‫موقع جمعية المحاسبون والمراجعون العرب‬

9. www.accountingeducation.com

10. www.pwc.com

11. www.deloitte.com

12. ‫ عمرو وهبة وآخرون‬،‫علم تدقيق الحسابات‬

13. International Accounting Standers (IAS), presentation of

financial statements.

52