Relevant Accounting Standards
1 Introduction
Remember, the financial statements will not show a true and fair view if amounts have not been calculated, classified, presented or disclosed in line with the applicable financial reporting framework. For ACCA exams this means IFRSs.
Definition: Applicable financial reporting framework – the financial reporting framework adopted by management in the preparation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements or that is required by law or regulation.
Auditors must therefore obtain evidence to confirm that the accounting standards have been complied with.
The table below summarises the accounting standards relevant to the ACCA syllabus. If you need to, go back to SBR material (available on the OpenTuition site). But, actually, the best way to revise these and see how they are examined in AAA is do do lots of past ACCA questions. Note that as past exams are not updated on ACCA's website, you should purchase a current edition Revision Kit from an ACCA-Approved publisher.
2 Audit procedures and obtaining evidence
The following table lists the classes of transactions, balances and events that may be reflected in a set of financial statements that are specifically mentioned in the ‘audit procedures and obtaining evidence’ part of the AAA syllabus. In order to design appropriate audit procedures about each of these, auditors must know the provisions of the relevant accounting standard(s) concerning, in particular:
Initial recognition and recognition criteria
Initial measurement (with the exception of grants related to assets this is invariably at cost)
Subsequent measurement (e.g. depreciated cost, amortised cost, fair value)
Classification, presentation and disclosure
Accounting standards will be relevant in the exam both in Section A (set at the planning stage of the audit) and in the Section B question drawn from the completion, review and reporting section of the syllabus.
Specific standard(s) | Other potentially relevant standard(s) | ||
|---|---|---|---|
i) | Inventory (including standard costing systems) | IAS 2 | IAS 23 |
ii) | Non-current assets | IAS 16 | IASs 20, 23, 36 & 37 |
iii) | Intangible assets | IAS 38 | IAS 36 |
iv) | Biological assets | IAS 41 | – |
v) | Investment properties | IAS 40 | IASs 16 & 36 |
vi) | Assets held for sale and discontinued operations | IFRS 5 | – |
vii) | Financial instruments | IAS 32/ | |
viii) | Accounting estimates including values | IFRS 13 | – |
ix) | Government grants | IAS 20 | – |
x) | Leases | IFRS 16 | IASs 16 & 24 |
xi) | Impairment | IAS 36 | – |
xii) | Provisions, contingent liabilities and contingent assets | IAS 37 | – |
xiii) | Borrowing costs | IAS 23 | – |
xiv) | Employee benefits | IAS 19 | – |
xv) | Share-based payment transactions | IFRS 2 | – |
xvi) | Taxation (including deferred tax) | IAS 12 | – |
xvii) | Related parties | IAS 24 | – |
xviii) | Revenue from contracts with customers | IFRS 15 | – |
xix) | Statement of cash flows | IAS 7 | – |
xx) | Business combinations | IFRS 3 | IASs 27 & 28 |
xxi) | Events after the end of the reporting period | IAS 10 | – |
xxii) | The effects of foreign exchange rates | IAS 21 | IFRS 9 |
xxiii) | Segmental reporting | IFRS 8 | – |
xxiv) | Financial statements notes and related disclosures | IFRS 18 | IFRS 12 |
xxv) | Earnings per share | IAS 33 | – |
xxvi) | Changes in accounting policy | IAS 8 | IFRS 18 |
xxvii) | Payroll and other expenses | IAS 19 | – |
Bear in mind that IFRS 18 Presentation and Disclosure in Financial Statements is relevant to:
the general principles of presentation (materiality and aggregation, offsetting)
comparative information
the structure and content of the financial statements generally:
statement of financial position
statement of profit or loss and other comprehensive income
statement of changes in equity
The relevant standard for going concern is IAS 8 Basis of Preparation of Financial Statements.
3 Accounting Estimates
ISA 540 Auditing Accounting Estimates and Related Disclosures is relevant to monetary amounts for which measurement is subject to 'estimation uncertainty' (i.e. an inherent lack of precision).
Responses to assessed risks of misstatement in an accounting estimate should include one or more of the following approaches:
Obtain audit evidence from events after the reporting date;
Test how management made the accounting estimate;
Develop an auditor’s point estimate or range.