Accounting questions Essay Example | Topics and Well Written Essays - 750 words

Accounting questions - Essay Example In Pakistan, the rules and regulations applying to published financial statements under Companies’ Ordinance 1984 include, release of quarterly financial statements by management after review of the same by an external audit firm (Ashraf & Ghani, 2005). Financial reporting in Pakistan takes formats in accordance with the IFRS (International Financial Reporting Standards). Other statutory requirements under the SECP include usefulness of statements to users by being understandable, relevant, faithfully represented, prudent, complete, neutral, and within the proper period. The change I would suggest to these regulations would include recognition of materiality and aggregation in presenting similar class items separately in the financial statements. This principle acknowledges substance over form and is closely linked to faithful representation of financial reports. This change would ensure that the auditors recognize the presentation of prepaid cards as revenue in accordance with their substance, which reflects economic reality. I tend to agree with the numerous accusations leveled against the auditors by the company’s management. First, the auditors had suddenly changed their view on recognition of prepaid cards as revenue for the financial period based on sale and not usage. The auditors had given a clean report of their audit, and still went ahead to suggest a different revenue recognition policy. The issue with meeting time deadlines by the auditors also violated SECP regulations on timely presentation of financial reports (Ibrahim, 2006). Regulations governing the corporate sector stipulate that the auditors should be free of any conflict of interest to give an unbiased and very independent opinion (Ibrahim, 2006). The replacement of auditors under SECP directives mandates the commission to appoint new auditors, which is a way of enhancing