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ACCA Applied Knowledge · Financial Accounting · The context and purpose of financial statements for external reporting

Which of the following best describes the primary responsibility of the directors of a company in relation to its financial statements?

Directors are responsible for preparing financial statements that give a true and fair view and for maintaining adequate accounting records and internal controls. Expressing an independent opinion on those statements is the external auditor's responsibility, not the directors'.

  1. APreparing financial statements that give a true and fair view and maintaining adequate accounting recordsCorrect
  2. BExpressing an independent opinion on whether the financial statements are free from material misstatement
  3. CApproving the dividend that shareholders have proposed at the annual general meeting
  4. DFiling the company's tax return on behalf of the tax authority

Explanation

Directors are responsible for preparing financial statements that give a true and fair view (or present fairly) and for keeping adequate accounting records and internal control. Giving an opinion on the statements is the external auditor's role, so option 2 is wrong.

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