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ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance

Which one of the following is a duty of the directors of a company in relation to financial reporting?

Directors must select and consistently apply appropriate accounting policies and make reasonable accounting estimates. Expressing an independent opinion on the financial statements belongs to the external auditor, not the directors, and directors need not personally re-perform every recorded transaction.

  1. AExpressing an independent opinion on whether the financial statements are free from material misstatement
  2. BSelecting appropriate accounting policies and making reasonable accounting estimatesCorrect
  3. CApproving the dividend that shareholders have already declared in general meeting
  4. DVerifying every transaction recorded in the ledgers by personally re-performing it

Explanation

Directors must select and apply suitable accounting policies and make reasonable estimates when preparing the statements. Giving an independent opinion is the auditor's task, so the first option is wrong. Directors are not required to personally re-perform every transaction.

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