Chapter 17 Law and Regulation Governing Accounting

Chapter 17 Law and Regulation Governing Accounting

Part 1 Authorities to Whom Companies are Accountable

Accountability- state of being accountable,liable or answerable for actions or conduct, of being responsible for actions or ommisions

Companies are accountable to various bodies

Almost every countries will be a government department set up to oversee regulation and accounts of companies.

UK- Companies house
S'pore-ACRA
M'sia - Company Commission of Malaysia
HongKong- Companies registry
Jamaica- The Companies Office of Jamaica

Companies required to submit financial statements to these bodies so that inspection can be made
Also, submit documents.

Part 2 Legislation Governing Financial Statements

-Most countries have a law which governs preparation of financial statements
-Name of law and contents varies from country to country
-Companies legislation in many commanwealth country is based on UK Companies Act.

UK- Companies act 1985 and 1989
S'pore-Companies act (cap 50) and various companies (amendment) acts
M'sia- Companies act 1965
HK- Hong Kong companies ordinance 1984
Jamaica- Companies act 2004

Part 3 Requirements for Financial Statements

-The Companies Act (UK) - Financial statements are prepared which give a 'true and fair' view.

-Financial Statements will generally be True and Fair if:

-follow accounting standards

-follow generally-accepted best practice

-have information of sufficient quantity and quality to satisfy the reasonable expectations of the users.

-Sufficient quantity indicates that the information must be adequately detailed.

-Sufficient quality means that the information should be reasonable accurate and 'not materially misstated'

-Materially misstated means that the financial statements may have misstatements (errors) but they should not be large enough to be important to anyone reading the accounts.

-Companies have to maintain proper accounting records which are sufficient to show and explain the transactions.

-The content of the records is not defined but a record of transactions, assets and liabilities would be required as a minimum.

Part 4 Responsibility for Financial Records

-Under companies legislation, directors are responsible for producing financial statements which give a true and fair view.

-This is delegated within the company to the finance director (FD) or Chief Financial Officer (CFO). The financial reporting section within the accounting department will assist the FD

- The trial balance will be prepared following input from all sections

-The sales ledger function will estimate which debts are unlikely to be recovered

- The non-current assets section will estimate depreciation rates.

-The inventory section will value inventory at the year end

-Managers outside the accounting department, such as sales, may give input into estimates used.

-If the FD does not himself have the skills to prepare the financial statements, an accounting firm may be asked to provide assistance.

Part 5 Consequences of Compliance Failure

Part 6 Bodies Governing the Accounting Function

Part 7 The Role of the IASCF

The IASCF is the parent entity of the
~ IASB
~ SAC - consults with users of accounting standards and the accounting profession and advises the IASB
~ IFRIC - gives guidance on issues that are not covered in an accounting standard or where the guidance is conflicting

Part 8 The Role of IASB

Aims
- to develop a single set of high quality, understandable and enforceable global accounting standards
- to co-operate with national accounting standard-setters