3.2 Regulatory and Ethical Considerations

2026 Syllabus Objectives

By the end of this topic, you should be able to understand:

3.2.1 International Accounting Standards

  • The main provisions of: IAS 1, IAS 2, IAS 7, IAS 8, IAS 10, IAS 16, IAS 36, IAS 37, IAS 38

3.2.2 Ethical Considerations

  • Why accounting needs an ethical framework
  • The five fundamental principles of professional ethics
  • How ethical behaviour affects businesses and their stakeholders
  • The social implications of accounting decisions

3.2.3 Auditing and Stewardship of Limited Companies

  • The role and responsibilities of an auditor
  • The difference between external and internal audit
  • The difference between a qualified and unqualified audit report
  • Stewardship and the responsibilities of directors to shareholders
  • What "true and fair view" means in financial statements
  • How to use ethical and auditing knowledge to make informed business decisions

3.2.1 International Accounting Standards (IAS)

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What Are International Accounting Standards?

International Accounting Standards (IAS) are a set of rules that tell accountants and businesses how to record and report financial information. Think of them like a rulebook — they make sure every company prepares its accounts in the same way, so that anyone reading the accounts (investors, banks, the government) can understand and compare them easily.

Without these rules, one company might value its stock differently from another, making it impossible to compare them fairly.

IAS 1 — Presentation of Financial Statements

Main idea: This standard sets out how financial statements must be presented. It ensures that financial statements are complete, consistent, and comparable from year to year and between businesses.

Key requirements:

  • A complete set of financial statements must include: a statement of financial position (the balance sheet), a statement of profit or loss, a statement of changes in equity, a statement of cash flows, and notes to the accounts.
  • Financial statements must give a fair presentation of the company's position and performance.
  • Businesses must use consistent accounting policies — meaning they apply the same rules each year so results can be compared.
  • If something is important enough that leaving it out would affect a reader's decision, it must be disclosed (materiality).
  • Assets and liabilities, or income and expenses, must not be offset (netted off) against each other unless a standard specifically allows it.
  • Comparative figures from the previous year must be shown alongside the current year.

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