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Definition

Section 19 of the Financial Advisory and Intermediary Services Act (FAIS) requires that "...the financial statements be prepared in conformity with generally accepted accounting practice". The auditor must examine the accounting records of the company and carry out such tests in respect of such records and such other auditing procedures as he considers necessary in order to satisfy himself that the annual financial statements or group annual financial statements fairly present the financial position of the company or of the company and its subsidiaries and the results of its operations and those of its subsidiaries, in conformity with GAAP applied on a basis consistent with that of the preceding year. In reality, GAAP is an enormous collection of accounting policies to cover every possible situation that the company's accountant might come across, giving the proper accounting treatment. GAAP does contain areas where the accountant is free to exercise some discretion - particularly over how conservative he chooses to be. This can cause problems with comparisons between companies with different levels of accounting conservatism. Companies listed on the JSE are required to comply with International Financial Accounting Standards (IFRS).

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