accounting issues (FR) Flashcards
research question prep
what are the 6 key characteristics of a financial report
relevance
timeliness
faithful representation
comparability
verifiability
understandability
what are the 7 steps in the American accounting association method
step 1 - whats the facts
step 2 - ethical issues
step 3 - principles and ethics of the company
step 4 - what are the alternative actions
step 5 - what the ethics of the company say about the issues
step 6 - consequences
step 7 - decision
what are the two factors of a companies risk level
risk capacity
risk appetite
what does tara stand for
transfer
accept
reduce
avoid
how can risk be transfered
insurance covering a product/event
when is risk too high to the point of avoiding a product/ event
when the probability and consequence is too high without the possibility to reduce the risk
what are the elements of an control environment
ethical values and integrity
competence
morale
support
mission
structure
What is faithful representation
Complete
Neutral
Free from error
Relevance
It is relevant if it has the power to help a user make a choice
Varifiability
This is the concept that multiple professionals could read the same accounts and come up with similar reports
Timely
The sooner the information is available the more useful it is
Understandability
The report should be able to be understood by those with a business mindset
Comparability
The report should be easily comparable to previous year and similar companies in the same industry
what are the areas of a sound control system
risk assessment
control environment
controls activities
information / communication
monitoring
what is the control environment
this is the attitude towards the control system, starting from the top down. if there is a poor attitude from management towards the control system then the controls won’t work
