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Accounting, Controlling, and Auditing > Company Reporting & Auditing > Flashcards

Company Reporting & Auditing Flashcards

1
Q

Who has an interest in financial reports?

A

Stakeholders

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2
Q

Name at least five groups of stakeholders:

A 
Customers
Investors
Employees
Suppliers
Creditors
Governments
General Public
Analysts
Media
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3
Q

Name the four main accounting standards:

A
  1. OR - Swiss code of obligations
  2. IFRS
  3. US-GAAP
  4. Swiss GAAP FER
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4
Q

What is the principle of prudence in accounting?

A

Meaning:

Reason:

Used by:

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5
Q

What is the True and Fair View?

A

Meaning:

Reason:

Used by:

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6
Q

Give a historic recap of the OR

A

The OR is a sovereign right that is state legislation.

There have been 4 revisions based on social and economic changes.

The last revision took place in 2013 and notably made regulations now apply to all ventures regardless of the legal form except for sole proprietorships and partnerships with revenues under 500,000CHF.

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7
Q

What are the two main objectives pursued with IFRS?

A
  1. International companies are provided with universally applicable accounting standards
  2. Countries that do not have their own standards have access to universally accepted ones
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8
Q

Who publishes the IFRS?

A

IASB (International Accounting Standards Board)

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9
Q

Describe the IASB:

A

IASB is a private non-profit that is funded notably by the EU and various national governments, accounting firms, and its own licenses and publications.

The IASB under the IFRS Foundation publishes the IFRS standards and various other materials for interpreting them.

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10
Q

Describe the US-GAAP

A

In our context only applies to large companies publicly traded on the US Stock exchange.

Extremely extensive and clearly rule-based

FASB is the responsible rule setter

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11
Q

Principle based

A

OR and Swiss GAAP FER

formed generally and serve more as guidelines

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12
Q

Rule based

A

IFRS and US-GAAP

cook book accounting; e.g. every single accounting issue must be regulated somewhere

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13
Q

General requirements

A

OR; you look for the principle or basic principle

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14
Q

Topical focus

A

IFRS, US GAAP, Swiss GAAP FER; look for the concrete details/facts

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15
Q

Swiss GAAP FER

A

For medium sized companies in Switzerland and follows accounting by true and fair view

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16
Q

Audit

A

comparison of reported information with its underlying real economic transactions

Mitigates the information asymmetry between investors and management, so most informed decision making is possible

Scope depends on size and financing of company

No statement regarding the quality of the management

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17
Q

Audit report

A

result of the comparison of reported information and underlying real economic transactions

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18
Q

Small company auditing

A

have a less extensive audit and under certain circumstances no audit at all

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19
Q

Large company auditing

A

must have an ordinary audit and listed companies are generally subject to the strictest audit

20
Q

Internal audit

A

integral part of a company that audits in accordance with management guidelines

21
Q

External audit

A

audits are on a contractual basis and is independent, coordinates with internal audit

22
Q

Auditor

A

represents the interest of investors and are thus elected by the general meeting of shareholders (general assembly)

23
Q

Big4

A

Deloitte, Ernst & Young, KPMG, pwc

Only about 50% of their business is auditing, the other 50% is management consulting, M&A, tax consulting, and legal advice

Mainly focus on large listed companies

24
Q

Auditing standards

A

regulations that define exactly how an auditor must proceed while undertaking an audit

CH - PS or Prüfungstandards

International - ISA (International Standards on Auditing)

USA - GAAS (Generally Accepted Auditing Standards)

25
Q

Auditing rules of conduct

A
  1. Independence
  2. Integrity and Objectivity
  3. Confidentiality
  4. Professional Competence
  5. Appearance
26
Q

Audit supervisory institutions

A

Approve auditors and are concerned with quality of audits being carried out; inspecting documents of auditing company and reexamine auditing activities

27
Q

Audit expectation gap

A

The general public expects more from auditors than is possible

28
Q

Statement of profit or loss (Income statement)

A

Expenses Revenue
Profit

records success/failure of a company’s operations for a given time period

Importance:
Company - shows development of performance
Investor - indication for promising investment
Employees - information for bonuses and raises

29
Q

Statement of comprehensive income

A

Profit
+ Other comprehensive income

= comprehensive income

30
Q

Statement of change in equity

A

comprehensive income
transactions with shareholders

= change in equity

31
Q

Statement of financial position (Balance sheet)

A

Cash Liabilities
Other Assets Equity

Shows the financial status of a company or organization at a particular point in time

Assets = use of capital
liabilities and equity = sources of capital

32
Q

Statement of cash flows

A

c. f. from operating activities
c. f. from investing activities
c. f. from financing activities

Shows sources from which cash was received and has been spent. Shows whether the company has enough cash to pay its bills; how liquid it is.

Cash flow statement complements income statement by reconciling the accrual basis of accounting with the cash basis

33
Q

Notes

A

Explanations and details

34
Q

Accounting equation

A

Assets = Liabilities + Equity

35
Q

Current assets and liabilities

A

expected timeline of less than one year
asset will be turned into cash or used within one year
liabilities are due within one year

36
Q

Non-current assets and liabilities

A

long-term positions

full value of the asset will not be realized or used within the current year

37
Q

Capitalizing assets

A

asset is recognized on the balance sheet
expenditures are not recorded as an expense
costs are “parked” on the balance sheet

38
Q

Recording expenses

A

when future benefits of the asset arise e.g. depreciation of a machine
benefits: use of machine and produced products

39
Q

Initial valuation of assets and liabilities

A

Costs of acquisition or conversion

40
Q

Subsequent valuation: Historic cost

A

measurement in which we only depreciate a non-current asset in subsequent periods

41
Q

Valuation under IFRS

A

Initial measurement: acquisition cost or cost of conversion

Subsequent measurement: asset is regularly revalued at its current cost (current market value)

42
Q

Impairment

A

One-time value adjustments due to sudden market changes or disruptions

Can only lead to decrease in value of asset although exceptions exist

43
Q

Accrual accounting

A

Matches revenues with expenses at the time the transactions occur

exchange of cash is not decisive

ensures that the financial statements most accurately reflect the financial performance during a given period

44
Q

Income statement: COGS Method

A 
Sales revenue
- COGS
Gross profit
- distribution expenses
- administration expenses
- other expenses
EBIT
45
Q

C.F. from operating activities

A

Shows:

  • Information on progress of core business
  • C.F.s resulting from sales activities (purchasing, production, sales, etc.)
  • internal financing strength

Calculated via the direct or indirect method

46
Q

C.F. from operating activities: Direct method

A

All cash inflows and cash outflows from operating activities are directly shown

+ Cash revenue
- Cash expenses
option: interest, dividends, taxes
= cash flow from operating activities (direct)

47
Q

C.F. from operating activities: Indirect method

A

Most common among companies
Take an earnings figure from the income statement (EBIT) and incorporate the changes that affect cash

= EBIT
\+ Non-cash expenses
- Non-cash revenue
\+/- Changes in operating working capital
option: interest, dividends, taxes
= cash flow from operating activities

Accounting, Controlling, and Auditing (1 decks)

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