AAA – Nov 2012 – L3 – SA – Q3 – Regulatory Framework and Professional Standards

Identifying non-responsibilities of directors related to accounting functions in a company.

Question

The responsibilities of the directors in relation to the accounting functions of the company fall under the following EXCEPT:
A. Safeguarding the company’s assets and preventing errors and fraud in the company
B. Defining the concept of materiality and tolerable error as a guide to the auditor
C. Ensuring that the company keeps proper accounting records as defined in the legislations
D. Setting up internal control system in the company as a standard practice
E. Preparing the financial statements to show the results of the company for the year and financial position as at year-end

Answer

B. Defining the concept of materiality and tolerable error as a guide to the auditor

Explanation:
This option is incorrect because it is not within the directors’ responsibilities to define materiality or tolerable error for the auditor. These are standards set by auditing and accounting standards, and it is the auditor’s responsibility to apply these concepts based on professional judgment.

Tags: Accounting Functions, Directors' Responsibilities, Financial Statements, Internal Control
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2012

Uploader: Dotse