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Proper 
financial control ensures that the business is adequately financed to meet its obligations
. 
2.3 Financial management 
Financial management is a separate discipline from both management accounting and financial 
accounting, although in a small organisation the three roles may be carried out by the same person. 
The financial manager is responsible for raising finance and controlling financial resources, including the 
following decisions. 

Should the firm borrow from a bank or raise funds by issuing shares? 

How much should be paid as a dividend? 

Should the firm spend money on new machinery? 

How much credit should be given to customers? 

How much discount should be given to customers who pay early? 
 EXAM FOCUS POINT 
It is important that you understand this distinction between management accounting and financial 
accounting. You should bear in mind the different reasons for preparing management and financial 
accounts, and the different people to whom they are addressed.
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CHAPTER 8
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THE ROLE OF ACCOUNTING 
 
207 
2.4 Auditing 
The annual accounts of a limited company above a certain size (in terms of revenue) must generally be 
audited 
by a person independent of the company. The members of the company usually appoint a firm 
of registered auditors to investigate the financial statements and report as to whether or not they show a 
true and fair view. When the auditors have completed their work they must prepare a 
report 
explaining 
the work that they have done and the 
opinion 
they have formed.
In simple cases they will be able to report that they have carried out their work in accordance with the 
Auditing Standards and that, in their opinion, the accounts show a true and fair view and are properly 
prepared in accordance with company legislation. This is described as an 
unqualified 
(or an unmodified, 
clean) audit report. 
Sometimes the auditors may disagree with management on a point in the accounts. If they are unable to 
persuade the management to change the accounts, and if the item at issue is large or otherwise 
important, it is the auditors' duty to prepare a