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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

Which of the following best describes the main purpose of the directors' report that accompanies a company's annual financial statements?

The directors' report is the board's narrative statement accompanying the accounts. It gives statutory and explanatory information, such as the state of the company's affairs, recommended dividends and material developments. It is not an independent opinion; that is the auditor's role in the audit report.

  1. ATo give shareholders an independent opinion on whether the accounts show a true and fair view
  2. BTo give additional narrative and statutory information from the board, such as the state of affairs, dividends recommended and matters affecting the company's futureCorrect
  3. CTo replace the notes to the accounts with a summary of accounting policies
  4. DTo certify that the company's internal controls have been tested by the tax authorities
  5. To set out the auditor's fees and the terms of their appointment only

Explanation

The directors' report is the board's own communication. It supplies narrative and statutory disclosures such as the company's affairs, dividend recommendations and significant developments. The independent opinion on true and fair view comes from the auditor's report, so option 0 confuses the two documents.

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