Financial Accounting Regulations - Education Scotland

Accounting Financial Accounting Regulations, Social Accounting and Principles of Auditing [ADVANCED HIGHER] Susan McAuley abc Acknowledgement Learning and Teaching Scotland gratefully acknowledge this contribution to the National Qualifications support programme for Accounting. First published 2005 © Learning and Teaching Scotland 2005 This publication may be reproduced in whole or in part for educational purposes by educational establishments in Scotland provided that no profit accrues at any stage. ISBN 1 84399 079 2 © Learning and Teaching Scotland CONTENTS Section 1: Financial Accounting Regulations 5 Accounting Standards Board 5 Statement of Principles 9 Examples of Financial Reporting Standards 11 Section 2: Social Accounting 19 Environmental Issues 20 Sustainability 21 Legal Requirements 22 Section 3: Principles of Auditing 25 External Auditing of

a plc 26 Auditor’s Responsibility 26 Statutory Duties 27 The Audit Report 29 A DVA N C E D H I G H E R AC C O U N T I N G 3 © Learning and Teaching Scotland 4 A DVA N C E D H I G H E R A C C O U N T I N G © Learning and Teaching Scotland FINANCIAL ACCOUNTING REGULATIONS SECTION 1 Accounting Standards Board The Financial Reporting Council (FRC) is the UK’s independent regulator for corporate reporting and governance. The chairman of the FRC is appointed by the Department of Trade and Industry and the Bank of England. The functions undertaken by the regulator are carried out by operating bodies that it supervises; these include the Accounting Standards Board and the Auditing Practices Board. The Accounting Standards Board (ASB) took over from the Accounting Standards Committee (ASC) in 1990. Under the terms of the Companies Act 1985 its role includes developing principles to guide standards; to provide a framework to resolve financial accounting and corporate reporting issues; and to issue new accounting standards or amend existing ones. The ASB has the power to issue its own standards which the ASC did not, the intention being to increase the quality of accounting standards and increase the speed with which they are issued in response to new problems encountered in accounting. The ASC also contributes to the achievement of the FRC’s fundamental aims by improving standards of financial accounting and corporate reporting. The ASB has up to ten board members. The Chairman and Technical Director are full-time members while the remainder, who represent a variety of interests, are part-time. Board members are appointed by a Nominations Committee comprising the chairman and fellow directors of the Financial Reporting Council (FRC). Three observers also attend ASB meetings. Under the ASB’s constitution, votes of seven board members are required for any decision to adopt, revise or withdraw an accounting standard. The ASB also collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) to guarantee that its standards are developed with due regard to international developments as well as to ensure they influence the development of international standards. The Accounting Standards Board is autonomous in its role in issuing standards. It is, however, the practice of the Board to consult widely on all its proposals. A DVA N C...

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