- 4 Marks
Question
A public sector institution has recently had its operations enhanced and modified such that they qualify as Government Business Enterprise (GBE) within the meaning of IPSAS 1. The management of the institution, in preparing their financial report for 2015, realized that the existing financial laws and regulations do not support their new status.
Required: Describe FOUR challenges Public Institutions (like the one in the preamble) face in the preparation of their financial statements when some financial laws and regulations needed to support reporting on their new status and operations have become obsolete. (4 marks)
Answer
a) Challenges Public Institutions face in the preparation of their financial statements:
i) New Innovations
Sometimes financial regulations designed to promote financial soundness and reporting may prevent desirable changes and interfere with the ability of the financial system to adapt to new technology and innovations.
ii) Span of Time
Span of time may result in population increases, environmental changes, and changes in organisational structures. All these changes may impinge on the goals of a public entity and cause delays in the processes for the preparation of financial reports.
iii) Cost Benefit
Generally, the cost of providing financial information should not exceed the benefits to be derived from financial reports. Therefore, if existing financial regulatory framework results in more expensive means of preparation of financial statements the regulations tend to lose their relevance.
iv) Quality of Financial Reports
If existing financial laws and procedures do not enhance the quality of financial reporting, the objectives of providing financial information may be compromised.
(4 points for 4 marks)
- Tags: Financial Reporting, GBEs, IPSAS, Public Institutions, Regulatory Framework
- Level: Level 2
- Topic: Public sector fiscal planning and budgeting
- Series: NOV 2017
- Uploader: Sarah