Question 2

There has been increased scrutiny and criticism over the reliability of financial statements over recent periods. This criticism has included items such as:

High numbers of operating leases effectively representing off-balance sheet financing

Increased usage of alternative performance measures

Inadequate levels of goodwill impairment

Insufficient scrutiny from auditors Requirement:

Explain the action that the International Accounting Standards Board (IASB) and the audit profession is taking in respect of these issues outlined above, and discuss how much of an impact this is likely to have on the perceived credibility of financial statements. (33 marks)