Published Accounts theory Flashcards
What is an auditor?
Person who checks the books of a company to see they comply with accounting practices.
The auditor expresses an opinion on whether the accounts give and true and fair view of the performance and financial position of a business at a certain time.
Business can have internal auditors and / or independent external auditors.
What are the requirements of auditors?
Required to provide a report on the financial statements to the shareholders showing:
Proper books of accounts have been kept.
All information requested by them was made available.
Accounts comply with the Companies Act.
Financial statements give true, fair view of performance and state of affairs of a company at the end of the financial year.
Explain what is meant by ‘true & fair view’.
Accounting concepts have been followed during preparation and presentation.
Relevant information required is included in the accounts.
Accounts are prepared in a consistent manner from one year to the next.
The Companies Acts have been adhered to.
What are the responsibilities of directors?
Keep proper books of account and in doing so follow the Companies Acts in their preparation and presentation.
To safeguard the assets of the company.
To select suitable accounting policies.
To present annual financial statements.
To state what accounting standards have been followed.
Call AGMs
Two directors must sign the financial statements.
What must be contained in the directors’ report?
Significant changes in fixed assets.
LIst of the company’s subsidiaries and affiliates.
Dividends recommended for payment.
The amount to be transferred to reserves.
Details of any changes in the nature of the company’s business.
Likely future developments of the company.
Company compliance with their safety policy.
Activities in the area of research and development.
Explain corporate governance.
It is the rules or practices by which a board of directors manages a company effectively as well as providing accountability to its shareholders.
Explain the board of directors
Shareholders of a company elect a Board of Directors at the AGM to run the business.
They set the objectives and policies of the company.
Each director is give responsibilities in the running of the business.
The Board elects a Managing Director (MD) to run the day-to-day aspects of the business
What is the difference between a qualified and unqualified auditor’s report?
Qualified report- This is when the auditor is not satisfied with some or all of the accounts of a business.
Unqualified report - This is when the auditor is satisfied with all of the accounts of the business
Explain what an auditors report is
The auditors are required to provide a report to the shareholders of a company based on their examination of the accounts.
Reasons for a qualifed report
Auditor was unable to conduct complete verification of accounts accuracy due to certain omissions.
Auditor and management are unable to reach a compromise regarding method of treatment or valuation of certain assets.
Management unwilling to correct unacceptable practices.
Financial statements do not follow the Companies Acts.
Financial statements do not give a true & fair view of the business’s performance.
What is the purpose of the Irish Auditing and Accounting Supervisory Authority (IAASA)?
To supervise how the prescribed accountancy bodies regulate and monitor their members.
To promote adherence to high professional standards in auditing and accountancy
To monitor if the accounts of certain classes of companies comply with the Companies Acts.
Act as a specialist source of advice to minister on auditing and accounting matters.
What regulatory requirements are placed on limited companies?
Required to prepare and publish a P&L account and a balance sheet with explanatory notes annually.
These must be audited by an independent personwho attaches a report to them.
Accounts must be presented to the shareholders along with the directors’ report.
The accounts must be then filed with the registrar of companies.
Write a note on the Financial Reporting Board and Council (FRC).
A unified, independent regulator based in the UK.
It aims to support investor, market and public confidence in the financial reporting and governance stewardship of business enterprises.
Oversee the preparation and implementation of reporting standards.
5 operating bodies:
The Accounting Standards Board (ASB)
The Auditing Practices Board (APB)
The Financial Reporting Review Panel
The Professional Oversight Board (POS)
The Accountancy Actuarial and Discipline Board (AADB)
Explain the purpose of the Urgent Issue Task Force (UITF)/
Sub-committee of the ASB
AssistS the ASB where unsatisfactory or conflicting interpretations develop about an accounting standard or the Companies Act.
Seeks to arrive at a consensus on the accounting treatment that should be adopted.
UITF consensus are published in the form of UITF Abstracts and compliance with UITF Abstracts is necessary.
What regulations must accountants observe when preparing financial statements for publication?
The Companies Acts The Financial Reporting Council The Accounting Standards Board The Stock Exchange International Accounting Standards Board EU Directives
