Duty of care
Duty of care describes the responsibility to act with appropriate care, skill and diligence. In financial reporting, directors must take reasonable steps to maintain suitable records, assess accounting information and prepare compliant financial statements. Using accountants or auditors does not remove directors’ responsibilities. The detailed legal duty depends on jurisdiction and role.
Worked example
Directors should investigate an unexplained inventory balance and consider necessary adjustments rather than approving accounts solely because a trial balance agrees.
Common mistake
An external audit does not transfer responsibility for preparing the financial statements from directors to the auditor.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Supporting | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| FIA | FFA | Supporting | September 2026–June 2027 |