In-Class Test Revision Booklet Questions Topics PDF

25% In class test revision booklet questions topics 1) Corporate Governance: Corporate Governance is the system in which companies are directed managed and controlled in order to safeguard owners. There must be a minimum of 3 non-executive directors on the board and to form an...

25% In class test revision booklet questions topics 1) Corporate Governance: Corporate Governance is the system in which companies are directed managed and controlled in order to safeguard owners. There must be a minimum of 3 non-executive directors on the board and to form an audit. Why are the three recommendations necessary: - Directed= what decisions do the directors make and in what strategic direction are they taking the organisation. - Managed= Are decisions carefully considered or are they a knee-jerk reaction to competitor response. - Controlled= How are the results of action monitored. Is there any follow up response. 2) Subsidiaries: A Subsidiary company is one that is owned and controlled by another company. 3) Groups: A group company would have its business in the UK and one or more subsidiaries satisfying the Section 240 of the income taxes Act of 1988. 4) Control for a subsidiary to be consolidated within: The parent company has control over the subsidiaries; - Power to direct relevant activities= voting rights, rights to appoint or resign or remove key management personnel, Rights to appoint or remove another entity that directs relevant activities such as trading within a subsidiary. - Exposure or rights to variable returns= Variable returns is dividends or interest from debt or changes in value of investment. - Ability to affect the amount of returns= An investor (parent) can have the current ability to direct the activities of an investee (i.e., the subsidiary) even if it does not actively direct the activities of the investee. 5) IAS 8 (how does it on accounting policies specify for organisations to report changes in accounting estimates): If there are changes in accounting estimates then they must be applied prospectively looking forward. IAS 8 Accounting policies: - When organisations create its accounting policies but there are changes in accounting estimates, or identify errors, which may have impact upon the prior figures. - IAS 8 states the accounting policies must be specific principles. Basis (clarify how reached i.e. judgements or assumptions or estimates used for categories)  Conventions (historical cost convention) Rules +practices applies by an entity in preparing + presenting the financial statements. Need to FINISH. 6) Running order of current assets: Inventories, receivables, prepayments and cash. 7) Financial Statements as stated in conceptual framework: Fair presentation- relevant information… capable of making a difference to a user- predictive/ confirmatory value. Prepared under the going concern concept, will continue to trade for the foreseeable future. Accruals (matching) concept- effect transactions + events are reported in periods they occur even if cash receipts or payments is different. Materiality- omitting or misstating could influence that a primary user decisions and aggregation. No offsetting - faithful representation present economic phenomena in words and numbers- substance of the event/ transaction it is purporting to represent. 8) What does an internal auditor do? They assess and report how well the systems and processes: - Offer consulting help to improve those systems and processes. - Review wider issues such as the organisations reputation, growth and its wider impacts on the environment and the way it treats its employees (unbiased and objective view). - Independent from the organisations. Reporting level is different. 9) External auditors. Review and report upon financial risks and statements Report do financial statements follow a true and fair view. Differences between internal and external auditors: - Reporting. INTERNAL= Internal board and senior management who are within the organisation’s governance. Could not be non- executives. EXTERNAL= Shareholders or members- outside governance structure. - Objectives. INTERNAL= Evaluate and improve the effectiveness of governance, risk management and control processes. EXTERNAL= Add credibility and reliability to financial reports from the organisation to its stakeholders by giving opinion on the report. 10) Qualified Audit Opinion: Not a good thing, there is an issue with a set of financial statements. 11) Conceptual framework – 4 characteristics of financial information 4 main ones are, comparability, timeliness, understandability and verifiability 12) 4 main formats by IAS 1 presentation of financial statements - statement of financial position, statement of profit or loss or comprehensive income, statement of changes in equity and statement of cash flows are REQUIRED for IAS 1 13) 14) System of regulation of accounting – a principles-based system requires the exercise of more judgment in application than a rules-based system and a rules- based system will tend to give rise to a large number of accounting principles 15) Which regulations should an unincorporated organisation follow - FRS and GAAP as unincorporated= not a company or non profit 16) Which regulations does a public limited company have to follow – IAS, IFRS and companies act, it implies international trade includiing IFRS as stock trade 17) Going concern concept - This fundamental accounting principle assumes that a business will continue to operate indefinitely. In other words, it's assumed the company will not be forced to liquidate or cease operations in the foreseeable future. 1 This assumption impacts how financial statements are prepared 18) What are the directors duties as stated within the companies act – to act in good faith to promote the success of the company for the benefit of its members as a whole 19) What approach is taken with usa gaap – it follows a rules based approach 20) Which of the following best describes creative accounting – it is the exploration of financial regulations in order to gain an advantage and present figure in a misleading light 21) What type of audit report would an organisation prefer to receive – an unqualified audit report 22) Whst best describes retained earnings – historical profits from prior years after dividends 23) When can a creditor (payable) instigate a ‘winding up petiton’, if the debt has been unpaid for after the due payment date – three weeks 24) How does IAS 8 accounting policies specify for organisations to report changes in accounting policies and corrections of errors ? - it reports on a retrospective basis as estimating is the only prospective basis 25) 26) Applying the principles of the IAS 24 related party transactions, which of the following would require disclosures? - any family member  transactions require disclosure – if they have control, or significant influence or a key member of management 27) Under IAS 2 inventories – how should inventory normally be Measured? - on a lower cost or net realisable value basis 28) What are the five minimum inclusions of FRS 104 interim financial reporting - Full or abridged statements to include financial position, single comprehensive income, equity changes, cash flow and explanatory notes. Directors report is ONLY included in end year statement. 29) Under FRS 101 reduced disclosure framework, who can the disclosure exemptions apply to - Applies specifically to subsidiaries and intermediate parent companies and their individual financial statements. 30) When should FRS 102 the financial reporting standard be used – when not applying IFRS, FRS 101 or 105 31) Who does FRS 102 specifically state it is designed to be used by – entities not consitiuted as companies and not profit-orientated 32) Which of the following is opex reffering too – expenses incurred in running the business