Week 1 - Company Set up Flashcards
Who do the owners/shareholders appoint?
The board of directors
Who runs the company?
The board of directors
Who supports the board of directors?
Senior management, audit committee
Who makes up the audit committee?
Usually non-executive directors from the board of directors (aka directors that don’t run the company but just give advice)
Who appoints the internal auditors?
The audit committee
Who produces the annual report and the accounts for the owners/shareholders?
The board of directors and the senior management
What accounts are prepared for the owners/shareholders?
- Profit and loss account
- Statement of financial position
- Cash flow statement
- Notes to account
What problem occurs?
The shareholders do not believe the accounts (directors may inflate salaries/tamper)
How do we get around the problem?
Appoint an external auditor
What two things does the external auditor need to check?
- if the accounts are a true and fair reflection of the company’s position
- if they are compliant with the law e.g Companies Act 2006
