View Full Version : Questions about Auditors and Nations

September 16th, 2011, 02:44 AM
From what I understand, accounting is used both for determining how much tax a company pays and its financial health. Do public sector businesses pay taxes to the government (sounds a little redundant)? Who audits governments? Do governments own audit firms? Is KPMG a privately owned business, or is it a public one?

Because, I was thinking about Stalin's Russia, and recalled that he produced fake figures to make people think that the USSR was doing better than it really was. What is in place in nations today that prevents governments all over the world from doing the same thing? If they audited themselves, wouldn't it be possible for them to lie about their financial position and thus appreciate/depreciate their currency against that of other countries'? Is there some kind of international impartial party who ensures that the governments are all telling the truth about their accounts?

Google doesn't seem to be turning up anything relevant for me, so I thought I'd ask and see if there's anyone who's knowledgeable about this kind of stuff.

September 16th, 2011, 06:13 PM
Oh, faking statistics? A bunch of governments sill do it. The Chinese hide defense spending all the time, as does the Pentagon, IIRC Argentina fakes its inflation stats... But yeah, the thing is that it's often pretty doable for 3rd parties to do the numbers themselves and get the right answer. Plus, lying about your accounts tends to get you in bigger trouble.

September 17th, 2011, 02:41 AM
So, am I correct in summing that it isn't commonly done because it's harder to do than not to do?

What about taxes? Seems pretty redundant for governments to tax public sector businesses.

September 17th, 2011, 11:09 AM
What about taxes? Seems pretty redundant for governments to tax public sector businesses.

I would imagine that fully-nationalised businesses (i.e. ones where the profits go directly to the treasury) do not get taxed directly, because that would indeed be pointless. However, businesses where the government simply owns all or the majority of the shares in that company would likely be taxed as normal, because they are formally a seperate entity and excluding them from the normal taxation system would mean writing explicit exceptions into the law that could easily be abused. Further, state-run businesses most likely still pay tax indirectly, such as income tax, VAT and other such taxes, again because it's simply easier not to exclude them explicitly, and people who work for them still pay tax as normal.