Create
Learn
Share

Reading 21-3

rename
msk2222's version from 2018-02-03 20:17

Summary

Financial Notes and Supplementary Schedules

Financial Notes and Supplementary Schedules

Question Answer
notesinformation that is essential to UNDERSTAND the information provided in the PRIMARY statements.
Informationaccounting policies, methods, and estimates used to prepare the financial statements.
flexibility in accountinga company will SELECT those POLICIES, METHODS, and ESTIMATES that are allowable and most relevant and that fairly reflect the UNIQUE economic ENVIRONMENT of the company’s business and industry.
Comparabilitydifferent companies’ information is MEASURED and REPORTED in a similar manner over TIME.
Comparability helpsidentify and analyze the real ECONOMIC differences across COMPANIES, rather than differences that arise solely from different accounting choices.
company acquires a piece of equipment to use in its operationsaccounting standards require that the cost of the equipment be REPORTED AS AN EXPENSE by allocating its cost less any residual value in a systematic manner over the equipment’s USEFUL LIFE.
depreciationThis allocation of the cost
Whats in notesA company’s significant accounting CHOICES (POLICIES, METHODS, and ESTIMATES)
memorize

Management Commentary or Management’s Discussion and Analysis

 

Question Answer
management report(ing)management discusses a variety of ISSUES of CONCERN, including the NATURE of the business, past RESULTS, and future OUTLOOK. management commentary, operating and financial review, and management’s discussion and analysis.
Recommended bythe International Organization of Securities Commissions and frequently required by regulatory authorities,
The frameworkGUIDANCE rather than sets forth requirements in a standard.
five content elements of a “decision-useful management commentary1) the NATURE of the business; 2) management’s OBJECTIVES and STRATEGIES; 3) the company’s significant RESOURCES, RISKS, and RELATIONSHIPS; 4) results of OPERATION; and 5) critical PERFORMANCE MEASURES.
memorize

Auditor’s Reports

Question Answer
audit reportwritten opinion on the financial statements
objectives of an auditorA) To obtain reasonable ASSURANCE about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to EXPRESS an opinion on whether the financial statements are prepared, in all material respects, in ACCORDANCE with an applicable financial reporting FRAMEWORK;
independent audit reportREASONABLE ASSURANCE that the financial statements are fairly presented, meaning that there is a high probability that the audited financial statements are FREE from material ERROR, FRAUD, or ILLEGAL acts that have a direct effect on the financial statements.
introductory financial statements that were audited and the responsibilities of both management and the independent auditor
“scope”nature of the audit process and provides the basis for the auditor’s expression about reasonable assurance on the fairness of the financial statements.
“opinion”expresses the AUDITORS opinion on the FAIRNESS of the audited financial statements.
unqualified audit opinion the financial statements give a “true and fair view” (international) or are “fairly presented” (international and US) in accordance with applicable accounting standards.
qualified audit opinionscope limitation or exception to accounting standards.
adverse audit opinionissued when an auditor determines that the financial statements MATERIALLY DEPART from accounting standards and are not fairly presented.
disclaimer of opinion reason, such as a scope limitation, the auditors are unable to issue an opinion.
memorize

Other Sources of Information

Question Answer
Proxy/Other Statementscompanies also provide information on management and director COMPENSATION, company STOCK PERFORMANCE, and any potential CONFLICT of interest that may exist between management, the board, and shareholders.
Interim reportsNOT AUDITED. semiannually or quarterly, depending on the applicable regulatory requirements
Current InfoWEB, in PRESS releases, and in CONF calls
memorize