Question

Professional judgement plays an important role in financial reporting.identify five area in which the accountant preparing financial statements must make professional judgments that will affect the content of the statement,you are required to indicate at least two affected accounts in each area you identified

Answer 1

Professional judgment is defined as the application of he accumulated knowledge and experience gained through a relevant accounting or auditing training, by making use of the ethical standards, resulting in making informed decisions about the courses of action that are appropriate in specific circumstances, such as an audit mission and/or the accounting of economic transactions, by observing accounting principles

.The five areas are

To ensure the regulation of accounting five area in which the accountant preparing financial statements must make professional judgments that will affect the content of the statement, and to determine ways to improve the accounting, in general terms;

To allow the users of financial statements to make reasonable decisions based on the provided financial information; · To create a climate of trust between the owners of capital and the business managers; To serve as a “referee” between the parties of the economic life, especially the accounting information providers and the auditors who certify its quality, thus  

ensuring its reliability.