You led a team of auditors from the Auditor-Generals’ Department to audit the Financial Statements of Ministry of Defence. You have just completed the audit and about to report your findings.
Required:
i) Explain the factors you will take into account to determine that the financial statements have been properly prepared in accordance with compliance framework. (6 marks)
View Solution
The factors to consider whether the financial statements have been prepared in accordance with compliance framework include:
- The accounting policies used by the entity. Ensuring that management selects and uses accounting policies which are acceptable, reasonable, correctly applied and adequately disclosed.
- Compliance with International Public Sector Accounting Standards (IPSAS).
- Ensuring that the financial statements should comply fully with laws and regulations.
ii) Explain the difference between fair presentation framework and compliance framework. (4 marks)
View Solution
Under fair presentation framework the financial statements must give a true and fair view in accordance with the relevant financial reporting standards. This may involve compliance with International Public Sector Accounting Standards (IPSAS) or local accounting standards.
Under compliance framework the main requirement is that the financial statements should comply with relevant laws and regulations. The application of the laws and regulations may not necessarily result in fair view being given. Once the laws and regulations have been complied with, the financial statements become acceptable.