Preparation of accurate and fair financial statements is recognized as one of the vital responsibilities of the directors of a company. While doing an audit, auditors are responsible for checking whether directors have fulfilled their obligation the preparation of true and fair financial statements and express a genuine opinion about the report.
Financial statements overriding principle is to provide its users with high-quality understandable financial reporting proportionate to the size and complexity of the entity and users’ information needs.
The essential financial reporting framework used in Republic of Ireland and the UK are IFRS, issued by the International Accounting Standards Board (IASB) and Irish and UK GAAP, published by the Financial Reporting Council in the UK (FRC).
The FRC aims to promote transparency and integrity in business. The FRC states and operates independent enforcement arrangements for accountants; monitor and take action to improve the quality of corporate reporting. FRC focuses on providing succinct financial reporting standards that:
1) It audits, monitors and enforces audit quality
2) Through the application of an IFRS-based solution, it maintains consistency with global accounting standards, to meet the overriding objective
3) Consistent principles of accounting followed by all the UK and Republic of Ireland entities with proportionate and practical solutions
4) Promote efficiency within groups and are cost-efficient when applied
The current framework of FRC UK & Ireland accounting standards as follows:
• FRS 100 – Application of Financial Reporting Requirements
- FRS 100 sets out the financial reporting requirements for the UK and Republic of Ireland entities.
- It states when a firm can apply the reduced disclosure framework when it should follow a SORP and thus explains which standards apply to which entity.
• FRS 101 – Reduced Disclosure Framework
- FRS 101 applies to the individual financial statements of a qualifying firm, that are intended to give an accurate and fair view of the assets, liabilities, financial position, and profit or loss for a period.
• FRS 102 – Financial Reporting Standard applicable in the UK and Ireland
- It is designed to apply to the general purpose financial statements, and it includes financial reporting of a firm that isn’t constituted as companies and those that are not profit-oriented
• FRS 103 – Insurance Contracts
- This FRS integrates and manages existing financial reporting requirements and guidance for insurance contracts.
• FRS 104 Interim Financial Reporting
- This FRS sets out content, recognition and measurement principles for interim financial reports
- Entities that apply FRS 101 to prepare the annual financial statements may also use FRS 104 as a basis for their interim financial reports.
- FRS 104 does not impose an obligation on entities to produce interim financial reports; neither does it mandate its application by any entity.
• FRS 105 – The Financial Reporting Standard applicable to the Micro-entities Regime
- FRS 105 is designed to apply to the financial statements of companies, LLPs and qualifying partnerships that qualify for, and choose to apply, the micro-entities regime.
- FRS 105 is based on FRS 102, its accounting requirements are adapted to satisfy the legal provisions applicable to micro-entities and to reflect on the simpler nature and smaller size of micro-entities.
Hence above are FRS UK & Ireland accounting standards that needs to be followed.