Chapter 46: accounting standards

auditors

specialist external accountants who audit the account of a company

audit

an official examination and evaluation of an organization's financial statements, accounts, operations, or systems

true and fair view

auditors approve the accounts if they think they give a true and fair view of the company’s situation. A phrase used to say that the financial statements of a company give an accurate and honest picture of its financial position and performance

qualifications

A statement added to a report to indicate that there is something not fully in order.

misleading information

false information

cook the books

to change numbers dishonestly in the financial accounts of an organization.

overstate

makes it seem more important or serious than it really is.

understate

To describe something as less important, smaller, or less serious than it really is.

fraud

The intentional act of deceiving others by manipulating financial data to gain an unfair or illegal advantage

expectation gap

difference between what auditors are required by law to do and what clients and investors expect them to do

corporate collapses

when a large company suddenly fails, often due to financial problems, mismanagement, or fraud, leading to bankruptcy or liquidation

accounting irregularities

problems or unusual things in a company’s financial records. Intentional or unintentional deviations from standard accounting practices that result in inaccurate or misleading financial statements.

false accounting

The crime of deliberately giving incorrect or misleading information in a company’s financial records

regulated

controlled by laws. Auditors should supervise more closely.

supervise

To watch a person or activity to make certain that everything is done correctly, safely, or according to the rules

regulators

government agencies checking that the law is applied

transparency

open, honest, and clear about what’s happening. a clear picture of its true financial situation

auditor rotation

the principle that companies should be obliged to change their auditors regularly

conflict of interests

A situation in which someone cannot make a fair decision because they will be affected by the result.

Financial Reporting Council (FRC)

The FRC is the UK's independent regulator, promoting transparency and integrity in business through high-quality corporate governance, reporting, and auditing.

Generally Accepted Accounting Principles (GAAP)

in the US. like a rulebook for accounting

Financial Accounting Standards Board (FASB)

The independent organization responsible for establishing and improving Generally Accepted Accounting Principles (GAAP) in the United States

International Accounting Standards (IAS)

standards (rules) that companies all over the world will, ideally, end up using.

bodies

Organizations or institutions that have official authority over a particular field.

International Organization of Securities Commissions (IOSCO)

representing stock markets all over the world. IOSCO is like the global watchdog for stock markets and securities regulators

Securities and Exchange Commission (SEC)

The SEC is the U.S. federal agency responsible (the U.S. financial market watchdog) for enforcing laws related to the stock market, protecting investors, and ensuring that markets are fair and efficient.

regulatory powers

right to control financial activities. The legal authority given to a regulatory body to create rules, monitor compliance, and enforce actions when those rules are broken.

oversight

control