The accountancy profession also regulates the

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The accountancy profession also regulates the practice of audit by the publication of auditing standards. The Auditing Practices Board (APB) issues: International Standards on Auditing (ISAs) (UK and Ireland), Practice Notes and Bulletins. If auditors do not comply with standards they may be subject to action from their recognised supervisory body. For example, ISA 700 sets out the standard wording of the audit report as illustrated above.
Page 18 CT2-07: Introduction to accounts © IFE: 2014 Examinations The Actuarial Education Company There have been two major fears about auditors in recent years: conflicts of interest (if the auditing firm also acts in an advisory role to the company) familiarity threats (if the auditor has audited the accounts of a company for many years). There is new ethical guidance, which all professional bodies have now adopted. There is an overriding requirement for auditors to be conceptually independentof their clients. However, the decision as to whether or not an auditor is independent is -at least in the UK -a matter which is down to the individual auditor to determine, in the light of their own professional judgement and in the light of a prescribed “threats and safeguards” approach. Question 7.7 Give arguments for and against the following statement: “It should be compulsory that the auditors of a company should be changed at least once every five years”.
CT2-07: Introduction to accounts Page 19 The Actuarial Education Company © IFE: 2014 Examinations 5 Accounting concepts Accounting standards are based on concepts and conventions which have gradually come together and evolved over many years since bookkeeping and accountancy came into being. In more recent years accounting standards bodies have attempted to put more cohesion behind these concepts and conventions. For example, the International Accounting Standards Board published IAS 1 “Presentation of Accounting Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. Accounting Standards have placed greater emphasis on neutrality, rather than prudence, and there has also been a move away from historical cost towards “fair values”. In very broad terms, this means revaluing assets (and liabilities) in the statement of financial position at the end of each accounting period. Any loss on revaluation should be included in that period’s income statement. Any gain on revaluation is taken to the revaluation reserve in the statement of financial position, where it is held until the gain is realised (iethe asset is sold). A consequence is volatility in the financial statements and so this move is controversial. We will discuss revaluation further in Chapters 8 and 9. The 11 accounting concepts we discuss in detail are: the cost concept (often called “historical cost”) the money measurement concept the business entity concept the realisation concept the accruals concept the matching concept the dual aspect concept the materiality concept prudence the going concern concept consistency.

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