What is responsible for reviewing the accounting methods used by publicly owned corporations?
What is a Financial Statement Review?A financial statement review is a service under which the accountant obtains limited assurance that there are no material modifications that need to be made to an entity's financial statements for them to be in conformity with the applicable accounting framework (such as GAAP or IFRS). A review does not require the accountant to obtain an understanding of internal control, or to assess fraud risk, or other types of audit procedures. Consequently, a review does not provide the accountant with assurance that he has become aware of all the significant matters that would normally have been discovered and disclosed in an audit. Show
In a review, management takes responsibility for the preparation and presentation of the entity's financial statements, while the accountant should have a sufficient level of knowledge of both the industry and the entity to review the financial statements. How Expensive is a Financial Statement Review?The review is more expensive than a compilation and less expensive than an audit. It is preferred by those businesses whose lenders and creditors will allow them to use this approach, thereby saving the cost of a full audit. Procedures Used in a Financial Statement ReviewIn a financial statement review, the accountant performs those procedures necessary to provide a reasonable basis for obtaining limited assurance that no material changes are needed to bring the financial statements into compliance with the applicable financial reporting framework. These procedures are more heavily concentrated in areas where there are enhanced risks of misstatement. The types of procedures that would be reasonable to conduct for a review include:
There are also a number of review steps that can be utilized in specific areas, such as:
The preceding list represents a sampling of the review activities that an accountant could engage in. If the accountant believes that the financial statements are materially misstated, he should perform additional procedures to obtain a limited assurance that there is no need to make material modifications to the financial statements. If the statements are materially misstated, the accountant must choose between disclosing the issue in the report that accompanies the financial statements, or of withdrawing from the review. Who is responsible for accounting policies?Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by MICLA are described in Note 1 to the basic financial statements.
Who has primary responsibility over the accuracy of the financial statements of a public company?. 02 The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.
What method of accounting are publicly traded companies required to follow?GAAP is a set of accounting principles issued by the Financial Accounting Standards Board (FASB). In the U.S., publicly traded companies are required to follow GAAP when compiling their financial statements. Compliance with GAAP ensures transparency in financial reporting.
Who is responsible for financial statements?03. The financial statements are management's responsibility. The auditor's responsibility is to express an opinion on the financial statements.
What organization is responsible for GAAP?Today, the Financial Accounting Standards Board (FASB), an independent authority, continually monitors and updates GAAP. All 50 state governments prepare their financial reports according to GAAP.
What is the primary responsibility of an accountant?An Accountant helps businesses make critical financial decisions by collecting, tracking, and correcting the company's finances. They are responsible for financial audits, reconciling bank statements, and ensuring financial records are accurate throughout the year.
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