Financial Statements Essay Example | Topics and Well Written Essays - 1250 words

Financial Statements - Essay Example Financial accuracy and transparency is necessary for them as they would base their decision depending on the reports of the financial statement. The accurate representation of the financial statement would motivate an investor to invest, banks to lend money and the government to calculate the right amount of tax for the company. It also benefits the company by spreading their good name and increasing their goodwill in the market. Table of Contents Significance of Accurate Financial Statement for Outside Business Interest 5 Conclusion 7 References 9 Bibliography 10 Introduction The major motive behind creating a financial statement is to analyze the financial position of the company at the end of the year. It is very important to ensure that the financial statements are accurate, as the financial health of the company can be determined through the financial books of the company. It is a critical aspect for the business to create accurate statements because it is not only important for internal requirements of the company but also for the purpose of external reporting and expectation of the investors (Elmaleh, 2005, p. 105-106). The financial statements are the accounting reports which are used to communicate the financial information of the company to the external parties such as banks or the investors. If we consider it from the technical side, we can say that the financial statements help to summarize the processes in accounting and it provides a detailed tabulation of the accounting titles, and the amount of money. It not only indicated the financial position of the company, but also indicates the changes in the financial position from time to time in the organization (McCrary, 2009, p. 83-84). In the recent times, the two major areas that have been identified as the sources of inaccuracy are dishonesty and incompetency. So it can be said that if the organization wants to present a true and accurate picture of the firm, both to the internal and external stake holders of the company, then it must take measures to remove both of the aforementioned inaccuracies from the financial statements. Financial statement which lacks accurate data because of data collected from unreliable sources would be considered incompetent. Financial accuracy begins right from the time of recording the financial statements. Compromise should not be done at the time of recording the information, as it really becomes difficult for the auditor to analyze and detect the actual figures. This may also lead to miscalculations and misinterpretation of data. It is the duty of the audit firm to conduct an audit of the financial statement and ensure the accuracy of the books. During the auditing process the accounting books and the financial statements are thoroughly checked, the inconsistent recording of financial transaction and record of the entity is also ascertained according to the principles of Generally Accepted Accounting Principles (GAAP) or International Financia l Reporting Standards (IFRS), in the accuracy test. It is very important for companies to present an error free financial report to attract investors. Internal control system should be adequate to present a transparent image of the firm in the market. The internal control system would include the policies that organizations would adopt to prevent fraud, safeguard the assets of the firm and insert accuracy in the financial analysis. An