Accounting and Reporting
This domain tests the first head's statutory responsibility for accounting, the choice of reporting framework, and the deadlines and audit obligations attached to annual financial statements.
Who is responsible
The Law on Accounting and Financial Reporting (No. 234-V of 28 February 2007) places responsibility for organising accounting and for its condition on the first head. The first head approves the accounting policy, appoints the chief accountant (who must meet qualification requirements in regulated entities) and signs the statements. Outsourcing the function does not transfer the obligation.
Frameworks
Public interest entities, large businesses and listed companies report under IFRS; smaller entities may use the national standard or IFRS for SMEs. Primary documents are drawn up at the moment of the transaction or immediately after, must contain the mandatory elements, and are kept for at least five years.
Statements and audit
Annual financial statements are approved by the highest body, submitted to the statistics and tax authorities in the form and within the terms set by law, and published by public interest entities. Mandatory annual audit covers public interest entities, joint-stock companies, natural monopoly subjects and entities with state participation.
Worked example
An LLP with 40 employees and no securities claims no audit is needed. Check status before size: if the company is a public interest entity, a natural monopoly subject, or has state participation, the audit is mandatory regardless of headcount. The answer follows from the entity's legal status, not from the balance sheet.
Traps
Treating tax reporting as financial statements; approving the accounting policy after year-end; signing statements without the audit report; assuming an outsourcing contract removes the first head's liability.