Accounting

Question 1

What six elements are included in the annual report?

Answer 1

1. Financial performance highlights
2. Governance and ownership structure
3. Analysis of recent economic events
4. Financial Statements (balance sheet, income statement, and cash flow statement)
5. Footnotes explaining the elements
6. Independent auditor’s report and management’s statement of responsibility.

Question 2

Give examples of external users of financial information/annual reports (8)

Answer 2

Lenders, suppliers, shareholders, government agencies, the SEC, customers, and employees (current and potential).

Question 3

Give examples of internal users of financial information/annual reports (2)

Answer 3

Board of directors, managers from various departments (e.g., purchasing, finance, marketing, HR).

Question 4

What is the role of investor relations?

Answer 4

Ensures effective communication between a company and its stakeholders, including the financial community. It contributes to the fair valuation of a company’s securities.

Question 5

Who defines accounting rules? (3)

Answer 5

General Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) and
Local Regulatory Bodies

Question 6

What is the role of the auditor?

Answer 6

Auditors inspect and verify the accuracy of a company’s financial records. Public companies are required to be audited by independent public accounting firms.

Question 7

What is management’s responsibility in financial reporting?

Answer 7

CFO and other management executives take responsibility for preparing financial statements.

Question 8

What are two criteria that assets & liabilities are divided into?

Answer 8

Short- and long-term, operations- and non-operations related