Accounting Theory in Australia

Question 1

AASB Accounting Standards

Answer 1

Set of rules hat companies listed on the ASX and some other organizations must follow when they prepare accounting reports for their owners.
Rules issued by AASB.

Question 2

Reporting entity

Answer 2

An organization that must follow the AASB standards.
Are required to or chooses to prepare financial statements:
balance sheet/statement of financial position, statement of comprehensive income, statement of cash flows and statement of changes in equity.

Question 3

Purpose of general purpose financial reporting

Answer 3

Provides financial information about a reporting entity that is useful and potential investors, lenders and other creditors in making decisions relating to providing resources to that entity.

Question 4

Purpose of AASB accounting standards

Answer 4

1: help investors by ensuring that the accounting reports of public companies contain relevant and reliable information on company performance
2: assist directors of companies in performing duties.
3: give confidence to investors who want to invest their money on the ASX.

Question 5

Fundamental Qualitive Characteristics

Answer 5

Relevance
Materiality
Faithful representation

Question 6

Enhancing Qualitative Characteristics

Answer 6

Comparability
Understandability
Verifiability
Timeliness

Question 7

Financial Reporting Council

Answer 7

Supervises the work of the AASB.
1. Monitors process of adopting international accounting standards.
2. Gives advice to the Federal Treasurer on the standard setting process.
3. Gives advice to the Australian Accounting Standards Board.

Question 8

International Accounting Standards Board

Answer 8

Responsible for the development of a set of international accounting standards.

Question 9

Australian Accounting Standards Board

Answer 9

1: Develops accounting standards
2: Assists in the development of a set of international accounting standards.

Question 10

Australian Securities and Investments Commission

Answer 10

1: administers the Corporations Act and a number of other laws
2: enforce the AASB accounting standards
3: interprets accounting standards and issues these interpretations in documents known as regulatory guides.

Question 11

Australian Securities Exchange

Answer 11

Ensures that companies listed on the ASX follows the set of standards called Listing Rules.
Listing Rules set out the information that must be disclosed to the public and how often each year the information must be disclosed.

Question 12

External Auditing

Answer 12

External auditor: an accountant separate from the business and therefore can conduct an independent review of the business.
Protects external users of general purpose financial reports.