ABSTRACT
This chapter discusses the company’s obligations in its accounting and financial reporting. Knowledge or information about the company’s financial affairs is key to making the right decisions at the right time. The objective of accounting or financial reporting is to provide accurate financial information about the company that is useful to existing and potential investors, lenders, and other creditors in making decisions about investing in or lending to the company. And the company has choices about how to do this. In this chapter we discuss what the company is allowed to do. These choices require judgment on the part of the person preparing the accounts, and standards are needed in order to ensure consistency in the way these judgments are made. Industry bodies such as those responsible for the Generally Accepted Accounting Principles (GAPP) in the US, and the International Financial Accounting Standards (IFRS) in many other countries including the UK and Ireland, play a central role in setting these standards. This chapter also explains what an audit is and why the company needs to put in place an audit policy to determine its approach to the independent examination of financial information relating to the company and ensure that its books of accounts are properly maintained as required by law. A comprehensive audit policy will describe the rules and standards that a company applies to the conduct of an internal audit or the conduct of an external audit by an accounting firm. The audit policy is also important for maintaining information security, detecting any security incidents and to meet relevant compliance requirements. However, the main purpose of the audit policy is to set out the framework within which the company’s internal audit function provides objective and independent assurance and advice regarding the controls in place to mitigate against the financial risks faced by the company in doing business.
