7. Accountancy, Accounts and Auditors Flashcards
What is the range of influence of the accounting profession?
- Financial accounting
- Auditing
- Management accounting
- Consulting
- Taxation
- Government
What are the fundamental principles of the ACCA Code of Ethics and Conduct?
- Integrity
- Objectivity
- Professional competence and due care
- Confidentiality
- Professional behaviour
Who are the potential users of accounting information?
- Managers
- Shareholders
- Suppliers and customers
- Providers of finance
- Tax authorities (Inland Revenue)
- Employees
- Financial analysts and advisers
- Government
- Public
What are some traits of management accounts?
- Internal
- Can be in any format
- Looks forward (setting budgets) and backward (performance to date)
- May contain non-routine special reports
- Form and content not governed by statute
- Not subject to audit or any independent checks
What are variances?
The difference between budget and actual result.
What are some traits of financial accounts?
- Published
- Typically for members or shareholders of the company
- Format and content regulated by statute
- Look backwards
- Routine (usually annual)
- Often subject to audit
What do financial statements consist of?
- Statement of financial position
- Statement of profit or loss
- Statement of cash flows
- Notes to the financial statements
- Statement of changes in equity
What is the aim of external audit?
To ensure the financial statements are true and fair
What are the consequences of failing to file annual accounts?
- This is a criminal offense
- Director may be fined personally
What do the financial statements comprise of?
- Statement of profit or loss
- Statement of financial position
- Cash flow statement
- Notes to these documents
- Statement of reserves
What is another role of auditors?
- Examine the system of internal control
- Report to management about the company’s accounting procedures
What do auditors NOT do?
- Prepare financial statements (management does this)
- Check every transaction (look at a sample instead)
- Guarantee the financial statements are correct
- Specifically look for fraud
- Give guidance as to whether the company is good to invest in
- Establish the system of internal control
How are financial statements regulated in the UK?
Via:
- Company law
- Accounting standards
- Auditing standards
- IESBA
- Financial Reporting Review Panel
- Public Interest Oversight Board
- EU Law
- GAAP
What does IESBA stand for?
International Ethical Standards Board for Accountants
What does GAAP stand for?
Generally Accepted Accounting Practice (UK)
or
Generally Accepted Accounting Principles (rest of world)
What does IFRSs stand for?
International Financial Reporting Standards
Who issues IFRSs?
The IASB
What does IFAC stand for?
International Federation of Accountants
What is the IAASB a subcommittee of?
The IFAC
What does IAASB stand for?
International Auditing and Assurance Standards Board
What is the role of accounting standards?
To provide detailed regulations about disclosure and presentation of accounts.
Established by
- Financial Reporting Council (UK)
- IASB (International)
What is the role of Auditing standards?
Set out how audits should be conducted and how audit evidence should be obtained
- Governed by IFAC and it’s subcommittee: IAASB
What is the role of the Financial Reporting Review Panel?
To examine and question why a deviation from financial reporting standards have taken place.
May conclude the deviation is justified, but this is relatively rare.
What is the role of the Public Interest Oversight Board?
- Oversees IFAC
- Concentrates on audit, education and ethics
- Widens range of opinions taken into account when formulating accounting and Auditing standards
