COMPANY THEORY NOTES

Question 1

What is an internal auditor

Answer 1

Someone appointed within the business to set up internal controls so fraud and errors can be easily detected.

Question 2

What is an external auditor

Answer 2

Someone independently appointed by shareholders to express and opinion on the accuracy of the financial statements . An audit report is written.

Question 3

What is an unqualified report

Answer 3

Material aspects are represented accurately in the financial statements

Question 4

What is a qualified report

Answer 4

Fair representation of the financial statements with certain aspects that need to be highlighted that do not necessarily conform to the norms of Accounting

Question 5

What is an adverse report

Answer 5

In the opinion of the auditors there are irregularities in the financial statements that need to be investigated

Question 6

Code of conduct

Answer 6

Rules, regulations that need to be followed within the business

Question 7

Code of ethics

Answer 7

Moral code of behaviour that involves many stakeholders

Question 8

King code

Answer 8

Triple bottom line instituted in South Africa to provide a guideline for business’s moral code and their responsibility towards social upliftment.

Question 9

Three “bottom lines” of the king code

Answer 9

Economic
Social
Environmental

Question 10

What is the SAICA and what do they do

Answer 10

South African Institute of Chartered Accountants (can audit financial statements)

Question 11

What is the SAIPA and what do they do

Answer 11

South African Institute of Professional Accountants (set up internal controls in a business)

Question 12

What are the director’s responsibilities (2)

Answer 12

• responsible for code of conduct and internal control
• write a directors report which is published in the financial statements

Question 13

What are directors

Answer 13

Managers of the company- appointed by the shareholders

Question 14

What is the IRBA and what do they do

Answer 14

(The Independent Regulatory Board of Auditors) disciplinary procedures can be implemented through this board. Auditors need to be a member of this board and they need to be accountable to this board

Question 15

What is the IFRS and what do they do

Answer 15

(The International Financial Reporting Standards) looks at the GAAP specific rules and regulations that must be followed when reporting on specific items

Question 16

Internal control method for inventory

Answer 16

Stock takes regularly, checking documents with inventory

Question 17

Internal control for control of debtors

Answer 17

Debtors age analysis, credit ratings, fixed asset register, cash control-bank reconciliation, daily deposits, documents