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The Context and Purpose of Financial ReportingContext and purpose of financial reportingGovernance

ACCA · Question 01 · The Context and Purpose of Financial Reporting

Section A

Quantum Innovations, a rapidly growing tech startup, is preparing its first set of formal financial statements for external investors. The board of directors is discussing their primary responsibilities regarding these statements.

Which of the following is NOT a primary responsibility of the directors of Quantum Innovations regarding the financial statements?

Answer options:

A.

To select and apply appropriate accounting policies consistently.

B.

To express an independent opinion on whether the financial statements show a true and fair view.

C.

To safeguard the assets of the company and prevent fraud.

D.

To prepare the financial statements on a going concern basis, unless inappropriate.

How to approach this question

Recall the distinction between the roles of management (directors) and external auditors. Directors prepare and take responsibility for the statements; auditors provide the independent opinion.

Full Answer

B.To express an independent opinion on whether the financial statements show a true and fair view.✓ Correct
The directors are responsible for the preparation of the financial statements, selecting accounting policies, safeguarding assets, and assessing going concern. The external auditor is responsible for expressing an independent opinion on those financial statements.

Common mistakes

Students often confuse the responsibility for preventing fraud (directors) with the auditor's role.
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