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© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson.

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Presentation on theme: "© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson."— Presentation transcript:

1 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-1 chapter 7 Accounting statutory obligations Learning objectives –To learn the compliance requirements of the Corporations Act 2001. –To learn the compliance requirements of applicable accounting standards within Australia. –To understand audit requirements and other statutory obligations.

2 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-2 key terms accounting standards audit committees auditing auditing standards company policy corporate governance Corporations Act disclosing entity independent auditor industry codes of practice internal auditor Listing Rules reporting entity securities Trade Practices Act

3 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-3 The Corporations Act Provides for limited liability companies and their listing with ASX Categorises public and proprietary companies Distinguishes between small and large proprietary companies Provides financial reporting and audit requirements Administered by ASIC

4 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-4 Financial reporting and audit requirements Proper financial records are maintained A financial report to be prepared at the end of each financial year Financial statements to give a ‘true and fair view’ of company’s financial position The financial report must comply with accounting standards

5 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-5 Financial reports Must contain: –Statement of financial performance –Statement of financial position –Statement of cash flows –Notes to the accounts –Directors’ declaration –Audit report

6 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-6 Small and large proprietary companies A small proprietary company must satisfy two of the following criteria: –gross operating revenue for the year is less than $10 million –value of gross assets at year end is less than $5 million –fewer than 50 employees at year end A company that does not satisfy two of these criteria is a large proprietary company

7 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-7 Australian Stock Exchange - ASX The primary role of a stock exchange is to provide and maintain a market for trading securities that is: –fair and efficient –well-informed –internationally competitive –will secure investor confidence

8 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-8 ASX Listing Rules ASX is required by the Corporations Act to make Listing Rules: –listed companies must comply with these Listing Rules Listing Rules protect public interest Listing Rules ensure trading is orderly and efficient Listed companies are required to provide: –half-yearly financial reports –preliminary financial reports –audited financial reports

9 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-9 Australian accounting standards Developed and maintained by AASB AASB is also developing the Statements of Accounting Concepts (SACs) SACs provide the framework for general purpose financial reporting SACs are used to develop and revise accounting standards Reporting entities must prepare financial accounts that comply with the accounting standards

10 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-10 Australian accounting standards AASBs and the AAS provide the procedures and practices for recording financial transactions Examples: AASB1001 Accounting Policies AASB 1002 Events Occurring after Reporting Date AASB1004 Revenue AASB1008 Leases AASB1018 Statement of Financial Performance AASB1019 Inventories

11 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-11 Corporate governance Manner in which organisations are controlled and governed by the board of directors Shareholders, directors and auditors all play important roles in corporate governance Directors are required to publicly disclose their corporate governance practices on: –risk management –internal controls

12 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-12 Audit committees A subcommittee of the board of directors Comprises non-executive directors Represents owners rather than management Supervises: –financial reporting –audit process Deals with the external auditor

13 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-13 Audit Financial auditing is the independent examination and evaluation of an entity’s financial information with the view to expressing an opinion Auditor must be: independent competent

14 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-14 Auditor’s opinion The Corporations Act requires the auditor to report on whether the financial statements: –are properly drawn up in accordance with applicable accounting standards –give a ‘true and fair view’ of the company’s financial position –comply with the Corporations Act and other statutory regulations

15 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-15 Auditing standards Provide a framework and guidelines for the audit Advise on practices and procedures to be followed during an audit Instructs auditors to have: –integrity –objectivity –independence –confidentiality –skill and competence

16 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-16 Types of auditors Independent auditors: render professional services on a fee-for-service basis Government auditors: employees of the government audit matters relating to compliance, efficiency and effectiveness of operations Internal auditors: employees of the organisation duties relate to internal control system

17 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-17 The role of the internal auditor Review and appraise internal control system Ascertain compliance with established policies, plans and procedures Safeguard the organisation’s assets Appraise quality of employees’ performance in carrying out assigned responsibilities

18 © 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham & D. Anandarajah. Slides prepared by Kaye Watson. 7-18 Other regulations on business Industry codes of practice The Trade Practices Act Superannuation levy Workers compensation insurance Occupational health and safety Australian Tax Act Industrial Relations Act 1999


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