Published a/cs Flashcards
Published a/cs
A/cs that public companies are required by law to produce on an annual basis
The bodies/institutions that regulate company financial statements
- government, w/ legislation
- European Union, w/ Directives
- stock exchange, w/ its listing rules
- The Accounting Standards Boards, w/ Financial Reporting Standards and Statements of Standard Accounting Service
What is an audit?
An independent examination of, and the expression of opinion on the financial statements of an enterprise by an appointed auditor.
What is the purpose of an audit?
To certify whether the a/cs give a true and fair view of the state of affairs of the company at the end of the year.
Accounts and information used to perform an audit
- balance sheet
- profit or loss from profit and loss a/c
- any other information required to be disclosed in the financial a/cs according to the Companies Acts
Qualified auditors report
When an auditor’s opinion is that they are not satisfied or are unable to conclude that the company if following the necessary guidelines.
Necessary guidelines to achieve an unqualified (good ) auditor’s report
- financial statements give a true and fair view of the state of affairs of the company
- financial statements are prepared in accordance w/ the Companies Acts
- all information necessary for the audit was available
- the information given by the directors is consistent w/ the financial statements
- net assets are more than 50% called up capital
Information in director’s report
- dividends recommended for payment
- amount to be transferred to reserves
- report of any changes in the nature of the company’s business during the year
- any likely future developments
- significant changes in fixed assets
Purpose of notes of a/cs
to inform the reader about how an accounting policy was used by a company
Exceptional Item
A material item of significant size. It is a profit or a loss that must be shown separately in the profit and loss a/c because of size. e.g. profit or loss on the sale of a fixed asset
Contingent liability/gain
possible liabilities/gains that haven’t occurred yet, probable or unlikely
What to do with a probable contingent liability/gain
estimated amount should be provided for in the a/cs and a note should show the nature of the liability/gain
What to do with an unlikely liability/gain
not necessary to provide for it in the a/cs, but a note should show the nature of the loss/gain, an estimate pf the amount and an opinion regarding it’s outcome
Why should financial statements be properly regulated?
To ensure that financial statements:
- are consistent from year to year
- can be easily compared w/ other businesses
- comply with national and international law
How does the EU regulate the presentation of a/cs?
By issuing directives, which are instructions that are binding to member states w/ a fixed period of time to implement the directive into the law, e,g, the fourth directive.
