👌memes👍25) auditing and stewardship — A Level Accounting CIE 9706
content and solved questions
- the role of shareholders
- stewardship
- roles and reponsibilities of auditors
- GAAPs
- Accounting concepts
- IAS 8 accounting policies
- IAS 10 Events after the Statement of financial position date
1. the role of shareholders
2. Stewardship: the role of directors and their responsibilities to shareholders
before annual general meeting:
3. roles and responsibilities of auditors
unqualified and qualified reports
a
An internal auditor is an employee of the company, responsible to the directors of the company for the performance of their day-to-day duties. Their work will involve looking at the financial systems in place in the company, ensuring the proper day-to-day management of the company finances. They may also have some involvement in the preparation of the financial statements of the company on behalf of the directors.
External auditors are not employees of the company and the process of auditing is separate from the preparation of the financial statements. They are appointed by the shareholders to act on their behalf. Their role is to consider whether the financial statements prepared by the directors and presented to the ordinary shareholders are free from any material misstatement or error and to report their findings.
b
A true and fair view means that the financial statements are free from any material misstatement and error and faithfully represent the financial performance of the business for the period under review.
c
The auditors must consider the materiality of the proposed adjustments in deciding what action to take. If adjustments are considered to be material (significant) and necessary to ensure that a true and fair view is given but are not made, then a qualified audit report is required. If the adjustments are deemed not to be material then an unqualified report is still possible
4. generally accepted accounting principles
for limited companies only
help to reject subjectivity and embrace uniformity in the disclosure of information
5. accounting concepts
relevant
reliable
comparable
understandability
6. IAS 8 Accounting Policies, changes in accounting estimates and errors
Accounting policies
Accounting estimates
Accounting principles
a.k.a. accounting concepts
accounting basis (plural bases)
reason for continuing existing policies or changing them
dealing with errors:
You don’t have to read this link. Just watch the video. You have to scroll down a little:
7. IAS 10 Events after the Statement of financial position date
non adjusting events
- Overadded inventory: this should be adjusted under IAS 8 as it would appear to be a (large) material error. It has also come to light before the accounts have been approved.
- Directors’ bonuses: this is an adjustable event under IAS 10 because the conditions existed at the year-end — the directors were always going to be paid a bonus, it was just the size that was unknown. The change can be made before the accounts are approved.
- Irrecoverable debt: this is not an adjusting event because it happened after the accounts were approved on 31 August 2020. It is of course possible that the expense has been accounted for if the company had made this customer the subject of a specific allowance for doubtful debts but the actual balance of $61000 cannot be formally written off.
- Factory in France: this is not an adjusting event because the conditions did not exist at 31 March 2020 so any financial impact of buying the factory will need to be recorded in the accounts for the following year.
- Legal proceeding: this is not an adjusting event because the conditions did not exist at 31 March 2020 — the faulty goods had not yet been bought. So any financial impact of starting legal proceedings will need to be recorded in the accounts for the following year.
