1.4 The role of financial accouting standards

Question 1

Name four corporate failures that led to improvements in accounting standards.

Answer 1

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1 Enron (2001)
2 WorldCom (2002)
3 Parmalat (2003)
4 Carillion (2018)

Question 2

Reasons for the corporate collapses of international companies?

Answer 2

1. Fraud
2. Irregularities in accounting procedures
3. Misrepresentation of the financial state of affairs

Question 3

What are the key objectives of financial accounting standards?

Answer 3

1. Improve transparency of financial reporting
2. reduce risk of “creative accounting”
3. Comparability
4. Improve credibility by improving the uniformity of accounting treatment between companies
5. Improve the quality of reporting