The company which have been considered here for discussion on the given topic is AFT Pharmaceuticals Limited. Where the major service of the company is to providing the health care services. Where the patient and doctor connect with each other through a common portal. The main objective of the company to reduce the distance between doctors and patients and helps in providing better health services within appropriate time (Arnott, et al., 2017). The annual report of a selected company has been downloaded and analyzed whether the company has complied with the regulatory guideline in the preparation and presentation of financial statements and how much it is useful for users to take effective decisions and what are the major area where the company needs improvement. The conceptual framework which helps in preparation of financial statement that has been presented by the IASB major objective is to improve the significant characteristics like timeliness, reliability, validity etc. after considering the financial statement prepared by the companies all around the world. All these steps helps the financial users of the financial statement to understand the impact of each and every item on the financial position of the company as well as in taking better decision in the interest of stakeholder and company. The conceptual framework also aims to reduce the errors and irregularities and increase the reliability and improve the element of comparability (Bumgarner & Vasarhelyi, 2018). With the help of these framework the company can ascertain that there in uniformity among the companies on the basis of which companies preparing their financial statements.
With the help of the annual statements of the company it can be analyzed on the basis of which method of accounting the financial statement of company prepared and presenting the assets and liabilities in the balance sheet. In addition of all these the company also need to check whether the valuation methods are as per the rules and regulation and it discloses the true and correct view of financial position without any error (Werner, 2017). They also need to see that the various guideline issued by IASB whether the company comply with all those guideline and the management have the proper knowledge for the effective implementation. If the company AFT Pharmaceuticals Limited following these conceptual framework in the preparation of financial statements. The company have prepared the financial statement after considering the guidelines issued by IASB. Apart from all those things the company also need to provide attention on valuation method and other significant areas. The company also to disclose all this information in notes of accounts of the company.
Apart of all there are some fundamental qualitative characteristics of the conceptual framework which includes relevance and faithful representation. It is also the responsibility of management to check whether all the crucial information relation to the period for which financial statements has been provided for. The management also take care of that information should be faithfully represented and there should be no errors and frauds on part of the company (Chron, 2017). This is the standard procedure on the basis of which the conceptual framework has been prepared by the regulatory body and hence it would be highly beneficial to the users as the financial statements are free from all types of errors and irregularities. In case at any point the company has any threat to the materiality level, it should be the responsibility of the management of the company to give proper disclosure regarding that in the annual report of the company. The auditor is also responsible for the same.
The various qualitative characteristics includes-
Comparability
It is important to disclose the information in such a manner that it would take less time and easily compared with the information of the other companies. It also provides reliability that there is uniformity between the financial statements of the companies around the world so that helps in comparing the results accordingly. It also helps the user to make proper planning against their competitors and take efficient decision accordingly (Guragai, et al., 2017).
It should be important that the financial statement of the company must be free any kind of error and misstatement and should be free from any mistakes and fraud on part of the management. The management is also responsible to give written representation that the financial statement is free from errors and mistakes. At the time of making any assumption it is responsibility of management to disclose the same in notes to accounts. It is necessary to disclose all the significant accounting policies and accounting method if they are material (Jones, 2017). An extract from the annual report of the company has been given below-
It is important that information should be deliver to right person at the right time to take effective decision. The information should be related to the period for which financial statement have been prepared. In case any event affecting the materiality of the company then it should be disclosed in the annual report of the company (Marques, 2018). So from the above discussion it is clear that the information must be related to the current period and it should reflect the fair position of the company.
The financial statements should be prepared in such manner that these are easily understandable by user. As some times the user are not having expertise knowledge about the accounting terms and policies. Generally the user have basic knowledge, so it is important that the financial statement must be prepared in user friendly manner so it should be easy to understand and the report should not include any error and misstatement. The language used in report must be understandable by user and it should not be vague (Fay & Negangard, 2017). It should be the ultimate objective of the company preparing reliable financial statements.
On the basis of above discussion it is concluded that the financial statement must be prepared according to the principle of fundamental framework. At also need to follow all the principle and guideline prescribed under the framework. The main objective is to make the financial statement simpler so that the user can take effective decision. So it is better to apply all the guidelines issued under IASB for the better presentation of financial statement. Hence the above conceptual framework make the financial statement of the companies of the world more effective. Here in the given the company following the same guideline (Segal, 2017).
In the directors report the directors of the company should give a confirmation that they have prepared their financial statement as per the guideline of conceptual framework and, the financial statements have been as per the Australian Accounting Standards and the Corporations Regulations 2001. They have stated in the report that the financial statement give a true and correct view of financial statement of the company. The director has also give confirmation on the basis of management written confirmation that there are reasonable grounds to believe that the company would be able to pay of their debts (Raiborn, et al., 2016). Hence, in the given case also the company followed the same and stated the same in director report.
The auditor of the company responsible for the review of the financial statement of the company and give their opinion on the reliability of the same. After the in depth review of annual report they have to give their opinion that the financials are free from all kind of errors and irregularities. In case the auditor have given qualified report than the auditor need to provide the reason along with the report (Sonu, et al., 2017). On the basis of this report the user can take the decision whether it is beneficial for the users to invest in the company or not. An extract from the annual report of the company has been stated below-
Conclusion and Recommendations
On the basis of above discussion and analysis it is concluded that the company is free from all kind of errors and misstatement. The conceptual framework plays a crucial role in making the financial statement easy to understand for the users. It also helped in making the director more accountable and responsible towards their responsibility (Knechel & Salterio, 2016). In case of any failure they are solely responsible for that. It also helps in attaining uniformity between the accounts of the companies all around the world. Here in the given we can see that the company was comply with all the principles and guidelines for the better presentation of financial statement.
References
Arnott, D., Lizama, F. & Song, Y., 2017. Patterns of business intelligence systems use in organizations. Decision Support Systems, Volume 97, pp. 58-68.
Bumgarner, N. & Vasarhelyi, M., 2018. Continuous auditing—a new view.. Continuous Auditing: Theory and Application, 20(1), pp. 7-51.
Chron, 2017. five-common-features-internal-control-system-business. [Online]
Available at: https://smallbusiness.chron.com/five-common-features-internal-control-system-business-430.html
[Accessed 07 december 2017].
Fay, R. & Negangard, E., 2017. Manual journal entry testing : Data analytics and the risk of fraud. Journal of Accounting Education, Volume 38, pp. 37-49.
Guragai, B., Hunt, N., Neri, M. & Taylor, E., 2017. Accounting Information Systems and Ethics Research: Review, Synthesis, and the Future. Journal of Information Systems: Summer 2017, 31(2), pp. 65-81.
Jones, P., 2017. Statistical Sampling and Risk Analysis in Auditing. NY: Routledge.
Knechel, W. & Salterio, S., 2016. Auditing:Assurance and Risk. fourth ed. New York: Routledge.
Marques, R. P. F., 2018. Continuous Assurance and the Use of Technology for Business Compliance. Encyclopedia of Information Science and Technology, pp. 820-830.
Raiborn, C., Butler, J. & Martin, K., 2016. The internal audit function: A prerequisite for Good Governance. Journal of Corporate Accounting and Finance, 28(2), pp. 10-21.
Segal, M., 2017. ISA 701: Key Audit Matters-An exploration of the rationale and possible unintended consequences in a South African. Journal of Economic and Financial Sciences, 10(2), pp. 376-391.
Sonu, C., Ahn, H. & Choi, A., 2017. Audit fee pressure and audit risk: evidence from the financial crisis of 2008. Asia-Pacific Journal of Accounting & Economics , 24(1-2), pp. 127-144.
Werner, M., 2017. Financial process mining – Accounting data structure dependent control flow inference. International Journal of Accounting Information Systems, 25(1), pp. 57-80.
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