Financial Reporting Regulatory Framework Quiz

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Questions and Answers

Explain the role of the Sri Lanka Accounting and Auditing Standards Act No 15 of 1995.

The Sri Lanka Accounting and Auditing Standards Act No 15 of 1995 empowers the CA Sri Lanka to issue accounting and auditing standards.

What are the mandatory sources of GAAP (Generally Accepted Accounting Practices) in Sri Lanka?

The mandatory sources of GAAP in Sri Lanka are: Companies Legislation, SEC regulations and Rulings, and Accounting Standards as issued by the CA Sri Lanka.

What is the significance of the Companies Act No 07 of 2007 in the preparation and presentation of financial statements in Sri Lanka?

The Companies Act No 07 of 2007 makes the application of Sri Lanka Accounting standards mandatory for all companies enacted under the Act. Therefore, the financial statements of limited liability companies in Sri Lanka must be prepared based on the provisions of the Sri Lanka Accounting standards.

Describe the key components of the regulatory framework of financial reporting in Sri Lanka.

The key components of the regulatory framework of financial reporting in Sri Lanka include Accounting standards, Auditing standards, company law, company act, SEC regulations, and stock exchange rules. Signup and view all the answers

What is the role of the International Accounting Standards Board (IASB) in the development of accounting standards?

The International Accounting Standards Board (IASB) is responsible for developing and issuing International Financial Reporting Standards (IFRS), which are a set of globally recognized accounting standards. Signup and view all the answers

Explain the purpose of the IASB Conceptual Framework for Financial Reporting.

The IASB Conceptual Framework for Financial Reporting provides a set of concepts and principles that guide the IASB in developing accounting standards and help preparers of financial statements in applying those standards. Signup and view all the answers

What is the role of the Securities and Exchange Commission (SEC) in regulating listed companies?

The SEC Rules govern the listing of securities on the Exchange and continuing listing requirements to ensure an orderly and fair market, as well as efficiency and confidence of stakeholders. Signup and view all the answers

What is the primary objective of the International Financial Reporting Standards (IFRS) Foundation?

To develop a single set of high-quality, understandable, enforceable, and globally accepted financial reporting standards based on clearly articulated principles. Signup and view all the answers

Which professional body is responsible for issuing accounting standards in Sri Lanka?

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) is the body responsible for issuing accounting standards in Sri Lanka. Signup and view all the answers

What is the relationship between the International Accounting Standards Board (IASB) and the IFRS Foundation?

The IASB is part of the IFRS Foundation and is responsible for developing and issuing International Financial Reporting Standards (IFRS). Signup and view all the answers

What types of entities are considered Specified Business Enterprises (SBEs) in Sri Lanka?

SBEs include companies listed on the Stock Exchange, banks, insurance companies, finance companies, leasing companies, and unit trusts. Signup and view all the answers

What is the purpose of the Companies Legislation in Sri Lanka?

The Companies Legislation in Sri Lanka governs the formation, operation, and dissolution of companies, including regulations related to corporate governance and financial reporting. Signup and view all the answers

What is the main purpose of the Sri Lanka Accounting and Auditing Standard Monitoring Board (SLAASMB)?

The main purpose of the SLAASMB is to monitor and enforce compliance with Sri Lanka Accounting standards in the preparation, presentation and audit of financial statements of specified business enterprises to enhance the reliability of financial reporting in the country. Signup and view all the answers

What powers does the SLAASMB have to carry out its functions?

The SLAASMB is empowered to call for documents, information and explanations from Directors, Managers and Auditors for the purpose of carrying out its functions. Signup and view all the answers

What actions can the SLAASMB take if financial statements have not been prepared in accordance with Sri Lanka Accounting Standards?

If financial statements have not been prepared in accordance with Sri Lanka Accounting Standards, the SLAASMB could require the entity to make corrections. Signup and view all the answers

What are the two separate committees established under the SLAASMB and what are their respective responsibilities?

The two separate committees established under the SLAASMB are the Accounting Standards Committee and the Auditing Standards Committee, with the authority to oversee accounting and auditing standards respectively. Signup and view all the answers

How has the SLAASMB increased its capacity to carry out its functions?

The SLAASMB has gradually increased its capacity in line with the increase in the Specified Business Enterprises (SBE) audit market. Signup and view all the answers

Study Notes

Sri Lanka Accounting and Auditing Standards Act No 15 of 1995

Establishes the regulatory framework for accounting and auditing practices in Sri Lanka.
Aims to enhance transparency and accountability in financial reporting.
Mandates compliance with auditing standards and promotes the adoption of best practices.

Mandatory Sources of GAAP in Sri Lanka

Sri Lanka Accounting Standards (SLAS) issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka).
International Financial Reporting Standards (IFRS) as adopted by the Sri Lankan regulatory authorities.
Guidelines issued by the Securities and Exchange Commission (SEC) and the Central Bank of Sri Lanka.

Companies Act No 07 of 2007

Provides guidelines for the preparation and presentation of financial statements.
Enhances corporate governance and ensures accountability of companies to shareholders.
Requires compliance with SLAS and ensures accurate disclosure of financial information.

Regulatory Framework of Financial Reporting in Sri Lanka

Comprises the Sri Lanka Accounting and Auditing Standards Act, Companies Act, and regulations by SEC and SLAASMB.
Ensures firms adhere to ethical standards and reporting requirements.
Involves oversight by regulatory bodies to maintain public trust in financial statements.

Role of the International Accounting Standards Board (IASB)

Responsible for developing and promoting international accounting standards.
Seeks to harmonize accounting practices across different jurisdictions globally.
Engages with stakeholders to ensure standards meet the needs of users.

Purpose of the IASB Conceptual Framework for Financial Reporting

Sets out the fundamental concepts underpinning financial reporting.
Provides guidance for developing financial reporting standards.
Aims to enhance consistency and clarity in financial statements.

Role of the Securities and Exchange Commission (SEC)

Regulates listed companies to ensure they comply with securities law.
Protects investors by ensuring transparent and fair trading practices.
Monitors financial reporting to maintain market integrity.

Primary Objective of the IFRS Foundation

To provide a rigorous framework for the development and promotion of IFRS.
Supports the IASB in achieving its mission of harmonizing accounting standards.
Enhances the quality of financial reporting globally.

Professional Body Issuing Accounting Standards in Sri Lanka

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka).
Responsible for developing SLAS and overseeing compliance.

Relationship Between IASB and IFRS Foundation

The IASB operates under the IFRS Foundation, which provides governance and oversight.
IFRS Foundation facilitates resources and support for IASB's standard-setting activities.
Together, they aim to promote the adoption and application of high-quality accounting standards.

Specified Business Enterprises (SBEs) in Sri Lanka

Entities defined by specific criteria under the relevant legislation.
May include listed companies, banks, insurance firms, and larger private companies.
Required to adhere to stricter accounting standards for transparency.

Purpose of the Companies Legislation in Sri Lanka

Establishes legal framework for company formation and operation.
Protects interests of stakeholders, including shareholders and creditors.
Sets rules for financial disclosure and corporate governance.

Main Purpose of the SLAASMB

Monitors compliance with Sri Lanka Accounting Standards.
Aims to enhance the quality and reliability of financial reporting in Sri Lanka.
Ensures accountability and transparency in financial management.

Powers of SLAASMB

Authority to conduct investigations into financial statements.
Can impose penalties or sanctions for non-compliance with accounting standards.
Engages in public education initiatives on accounting practices.

Actions by SLAASMB for Non-Compliance

May require restatement of financial statements.
Can issue public notices or warnings regarding non-compliance.
Authorities may also pursue legal actions if necessary.

Committees Established Under SLAASMB

Technical Committee: Focuses on the technical aspects of accounting standards.
Monitoring Committee: Oversees compliance and enforcement of standards.

SLAASMB Capacity Increase

Enhanced collaboration with international accounting bodies.
Development of training programs to educate accountants and auditors.
Improvement in resources and infrastructure for better oversight functions.

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Description

Test your knowledge on the regulatory framework of financial reporting which includes accounting standards, auditing standards, company law, SEC regulations, and more. Learn about Sri Lankan GAAP and Generally Accepted Accounting Practices.