3.6.
1 GENERAL FILING REQUIREMENTS
In most countries there is a legal obligation on businesses and particularly on limited companies to record financial data, to keep financial records and to file or submit financial information to the relevant authorities at appropriate times. They are also required under law to have their accounts audited unless they are exempt. This will vary between countries but the main requirements are: Preparing and filing accounts. There are deadlines by which accounts must be prepared and delivered to the relevant registration body. In many countries if there is an automatic penalty for late submission, without exception. Accountants and auditors need to be aware of the filing deadline. 2. Content of accounts. The accountant must have specialist knowledge of this from minimum disclosure requirements under relevant company law and from accounting or financial reporting standards that apply in your country. 3. Audit requirements. In most countries, most companies, unless they are exempt, must have their accounts audited for each accounting period and the accounts submitted must have the signature of the auditor included to verify that they represent the true and fair financial performance and position of that company.
1.
3.6.2 ACCOUNTING REPORTING PERIODS
Every company has a duty to keep accounting records and must prepare annual accounts that report on the performance and activities of the company during the year. In most countries there are deadlines by which accounts must be filed with the relevant
registration authority and there are usually penalties for late or nonsubmission. Which records should be kept? Trainee accountants are often responsible for the recording and processing of financial transactions and inputting of financial data into accounting systems. In many countries national company law prescribes certain accounting information or records that must be kept for statutory purposes, including for taxation. Examples of such records are listed as follows:
Sales Purchases Expenses Amounts owing to suppliers (purchases ledger) Amounts owing from customers (sales ledger) Balances of cash Balances at the bank Non-current asset registers Long-term liabilities Inventories Capital account
What is a financial period? The period reported on in the accounts is called a financial period. This starts on the day after the previous financial year ended or, in the case of a new company, on the day of incorporation. The financial period or accounting reference period as it is sometimes called, ends on a specific date known in some jurisdictions as the accounting reference date (ARD) or at a date
within a short window either side of the ARD, if this is more convenient.
3.6.3 PREPARING AND SIGNING OFF FINANCIAL STATEMENTS
This section explains the basic rules on filing financial statements. It applies to all company financial statements irrespective of whether any filing exemptions apply to the content of the financial statements. Do all companies have to keep accounting records? Yes, in most countries, all limited and unlimited companies, whether or not they are trading, must keep accounting records. What does a set of financial statements include? Generally, financial statements must include:
An income statement (profit and loss account) or income and expenditure account if the company is not trading for profit A statement of financial position (balance sheet) signed by a director Statement of cash flows Statement of retained earnings An auditor's report signed by the auditor (if appropriate) A director's report signed by a director or the secretary of the company Notes to the financial statements Group financial statements (if appropriate)
Who can approve and sign financial statements? In most countries, the financial statements must be approved by the company's board of directors and signed before they are sent to the relevant registration body.
The statement of financial position must be signed by a director, with any commentary about accounting or filing exemptions appearing above the director's signature The directors' report, if one is required, must be signed by a director or the company secretary If an auditors' report, special auditors' report or accountants' report is attached to the financial statements, then it must state the names of the auditors or accountants and be signed and dated by them
3.6.4 REPORTING EXEMPTIONS
What exemptions are available? In some countries companies classed as small or medium, under particular criteria such as turnover, profitability or number of employees, for example, may prepare and deliver abbreviated accounts to the registration authorities and may claim audit exemption. Are annual accounts required if a company is not trading? It is usually a requirement that all limited companies, whether they trade or not, must deliver accounts to the registration authority of the country. However, a limited company may claim exemption from audit as a 'dormant company' if it has not traded during a financial year, and provided it meets certain other criteria.
3.6.5 THE AUDITOR OR REPORTING ACCOUNTANT
Most countries require at least their larger companies (defined under law) to have their accounts audited by an external and independent authority to assure quality and reliability of company accounts filed. This authority can be an individual, or organisation as recognised under law. To ensure independence, auditors should be external to the company and should not be or include an officer or employee of the organisation being audited. Who can be an auditor or reporting accountant? The reporting accountant or auditor is normally a qualified accountant recognised by the company legislation in the country. A reporting accountant is either:
Any member of a body approved by the legislature or company legislation of the country who, under the rules of that body, is entitled to engage in public practice, and who is eligible for appointment as a reporting accountant Any person, (whether or not a member of any such body), who is eligible for appointment as a company auditor under the rules of that body
4.1 INTRODUCTION
A framework of professional principles can guide behaviour where the law is not applicable, not clear, or remains silent. Behaving legally is the minimum standard of behaviour expected of the ethical accountant. Some behaviour, while legal, may still be regarded as unethical. Many aspects and decisions within an
accounting role, at all levels, are not covered by the law. Therefore, in many different situations, the law is not sufficient to guide a professionals behaviour, but a professional is also expected to behave in accordance with accepted professional principles.
4.2 CODES OF ETHICS FOR ACCOUNTANTS
As mentioned in Section 2.2 of the module, when examining the characteristics of a profession, one feature is that professions usually operate under ethical codes. ACCA's Code of Ethics and Conduct, and the Code of Ethics for Professional Accountants of the International Federation of Accountants (IFAC), both contain five fundamental principles of professional ethics:
Integrity Objectivity Professional competence and due care Confidentiality Professional behaviour
Compliance with these fundamental principles is essential. But in addition, the professional accountant should avoid situations where compliance with the fundamental principles may be threatened. Each of the fundamental principles will now be considered.
4.2.1 INTEGRITY
The principle of integrity requires all professional accountants to be straightforward and honest in professional and business relationships. Integrity also implies fair dealing and truthfulness. A professional accountant should not be associated with reports, returns, communications or other information where they believe that the information:
Contains a materially false or misleading statement; Contains statements or information furnished recklessly Omits or obscures information required to be included, where such omission or obscurity would be misleading
