live soft skills

STAKEHOLDER ACCOUNTABILITY If we believe that stakeholders are important, and if we believe that stakeholders may also have some responsibility for company behaviour, we need to ensure that companies are reporting adequate information to these stakeholders. Over recent years, company Annual Reports have grown massively in size, and part of this growth has been in non-financial reporting . Triple Bottom Line But this raises additional issues: reporting refers to the growth in Social and Environmental disclosures alongside financial disclosures. o Are there any "rules" on what should be reported? o Will there therefore be any comparability year on year, or within industries? o Will information reported be balanced ... or will it inevitably be more positive than negative? o There have been developments in these areas in recent years. Environmental accounting and audit frameworks (such as EMAS and ISO14000) have been developed to provide some guidance. Auditing information i...

CORPORATE SOCIAL RESPONSIBILITY Much of the above analysis helps to split stakeholders into different types, but does not spend long looking at the moral aspect. As companies have grown into multinational organisations, their ability to affect the world and how society operates has grown as well: ● Companies can change the way society works Should companies consider stakeholders at all, and if so, which ones? o Mobile phones o Email o ● Companies pollute the environment, and big companies can have a noticeable effect on their local community ● A big company in a community will be a major employer – decisions it takes could be the main influence on the prosperity of the community ● Companies who use low cost countries for supplies and services could be seen to be keeping those countries low cost … which could mean they are keeping wages down to what might be viewed as unacceptably low levels Facebook So how much responsibility do these companies have for their actions? Should we ...

Agency theory and stakeholder theory Shareholders ( There is a risk that the directors do not run the company in the best interests of the shareholders … and this is the potential The question is, is this necessarily a problem at all… Earlier in the course, we defined corporate governance as "running the company in the best interests of shareholders ● Who are these other stakeholders? ● To what extent should / could / must the Board take them into consideration? ● What if what is good for one stakeholder is bad for another stakeholder? ● What if what is good for shareholders might be viewed as principals ) employ directors ( agents ) to run the company for them. agency problem . and other stakeholders ". This raises a number of questions: unethical behaviour ? Types of stakeholder Later in the chapter, we will look at the extent to which organisations might want to deal with different stakeholders. But before we do this, we need to consider It may be the case that di...

The overall authority of ISAs and how ISAs are applied in individual countries ISAs are designed to be applied in the audit of financial statements and may be applied to the audit of other historical financial information. Each ISA contains the basic principles and procedures to apply to that ISA (identified by bold type in the ISA itself). Other text in the ISA provides guidance on the implementation of the principles. In other words, to apply the ISA, the whole of the text, not simply the parts in bold type, must be read and understood. ISAs are not designed to override the requirements for the audit of entities in individual countries. So if our country did not require an audit of specific entities, then the ISAs would not overrule that requirement. Regarding the detailed requirements of an audit, such as the nature of testing or the issuing of an engagement letter, where our country requirements meet those of the ISA, then the ISA will be used. It is therefore unlikely that our co...

Analytical Procedures as substantive evidence ISA 520 states that analytical procedures must be used at the planning stage to identify risks, and at the completion stage of the audit as a final review of the FS. They may also be used at the substantive stage when the auditor is auditing the draft financial statements. Analytical procedures are not just the comparison of one year with another. AP’s can be used in the following ways: • Ratio analysis • Trend analysis • In order to use analytical procedures the following process should be followed: • Create your own expectation of what you think the figure should be • Compare your expectation to the actual figure • – Example 1 create an expectation of payroll costs for the year by taking last year’s cost and inflating for payrise and change in staff numbers – proof in total. – Example 2 – calculate the receivables day ratio and compare it with prior year and credit terms given to customers. If the figure is higher than expected it may i...

‘Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements’ ISA 320 para 3 So what really is materiality? (material by nature). • A big amount of money (material by size). • – triggers a threshold – indicates future developments or other significant events – whose disclosure is compulsory Why is materiality important? • show a true and fair view. If financial statements contain a material misstatement they cannot • of material misstatement to an acceptable level. Auditors therefore must design their audit procedures to reduce the risk • before they design their procedures – hence its place in this chapter. This means that auditors must decide on what they mean by ‘material’ What are the implications for the work the auditors do? Auditors will: BUT • Need to examine all items in the financial statements which are material • amounts have not been they will also need to design tests to give assu...

Bank and cash controls Control objectives ● That money is not stolen ● That money received is paid into company bank accounts quickly ● That payments are for genuine business purposes. Control procedures ● Money on company premises kept in a safe ● Where there are tills, these are: o Kept locked when no staff are present o Have prices of products pre-programmed o Only accessible to someone with a key, or a personalised swipe card o ● Money taken to bank using security vans, which do not always take the same route on the same day of the week ● List of approved signatures for each bank account ● Regular bank reconciliations ● Cash receipts recorded immediately, and compared with date cash arrives in bank account ● Payments above a minimum figure require 2 signatures. Reconciled daily (till record v actual cash in till)