Accountancy for Financial Status and Performance- myassignmenthelp

Question: Discuss about theAccountancy for Financial Status and Performance. Answer: Introduction The primary objective of the financial statements is to provide the users of the financial statements with the true and fair view of the financial status and performance of the economic entity. It is important the quality of this reporting is high, as the financial reports influence the decisions of the capital investors (Girard, 2014). The major value of the economic entity is dependent on the financial reports. It is the duty of the professionals to provide the genuine report on the condition of the entity. But there are limitations on financial reporting. Involvement of personal judgement of these professionals many times makes it unreliable for the investors to rely on the report. In the following report we have discussed the qualitative characteristics of the financial report and limitations on judgement of professionals on these reports in order to understand the financial reporting structure. (Ittelson, 2009) Qualitative characteristics of financial reporting The financial reports influence the decisions of the financial investors. The investors rely on these reports to judge the viability of the company (Lerner, 2009). Therefore a good financial report should contain the few qualitative characteristics in order to constitute a proper report. Relevance: it is important that the financial report contain all relevant information in respect to the entity. Be it financial or non-financial, any information which might affect the decision of the user should be included in the financial report. Reliability: it is one the major characteristics. The financial statements should be made in such a manner that that the investors can rely on the report for their judgement. Understandably: the financial reports will be of no use if the users cannot understand the data in them. Therefore it is important that the financial statements present the information in a manner which can be understood by the investors. Comparability: the financial statements made should follow all the accounting standards in the preparation, so that they can be compared with other entities. This helps the investors understand the performance of the entity with respect to another entity. The other qualitative characteristics of financial statements are consistency, freedom form bias, materiality, accrual and conservatism (Loughran, 2010). It is important that the professionals express an opinion on the statements that are free from personal judgment and present the actual financial position of the entity. Professional Judgement Financial Reporting With the growing complexity of the financial transactions, it is important that the financial information derived is reliable. Accountants are the professional which help us establish the authenticity of these financial statements. A judgement form a professional refers to the conclusion that one draws after taking into consideration all the relevant information. This judgement should be unbiased and should be made with professional scepticism. The relationship between the auditors and the investors play a very important role for a companys financial performance (McLaney Adril, 2016). It is important that there exists trust between them. But considering the recent events, we have seen that the trust of the stakeholders have declined due to major frauds taking place because of false reporting. It is the duty of the auditors to perform their duties professionally so that public trust is maintained. Since the professionals have failed to report the financial problems ongoing in the entities, it has majorly effected the decisions of the investors. This has taken away the trust of the investors and there reliability on the financial statements. Taking these frauds into consideration the Sarbanes Oxley Act and the Public Company Accounting Oversight Board was bought into action. This does not solve all the issues related to professional judgement (Piper, 2015). In order to bring back the trust lost, it is important that the auditors are made responsible for their judgement. Also, there should be guidelines which help the professional make the judgment. The judgement of the professional is a key skill, which helps him making an opinion on the financial statements (Sargeant, 2010). Apart from this, the professionals should also be made aware of importance of ethic in their professional work. Lack of ethics is the major reason for biasness in the professional reporting. Also to improve the reliability, the power of the professional should be reduced and there responsibilities along with liability should be increased. The main work of the professional is to express an opinion n the reports which are already prepared by the management. It is important that the preparers of the financial statement be also educated on the importance of the financial reports. It is then the auditors who should follow the principle and using their knowledge make correct opinion on the statements of the company (Siciliano, 2015). After the professionals are done making an opinion, the regulators should take some responsibility and assess the judgment made any the professionals. This will ensure the viability and authenticity of the financial statements. Many countries have set up a professional judgement framework in order to assist the professionals. This framework on judgement will help the preparers and the professionals to form a judgment without bias with the help of their knowledge, skill and experience. The principles laid down helps in setting a path for the professional make a judgement on the reports. It is important the auditors challenge the judgement of the preparers of the financial judgment and not blindly rely on them. They should also document the basis of such judgement (Strathern, 2010). They should check the source of information and should also double check the information from external sources. Financial reports are very important to ascertain the position and performance of the entity. The people, who do not take part in the day to day activities of the business, rely on these statements in order to evaluate the position of the entity. Therefore it is important that the financial statements represent true and fair view of the financial status of the company (Taillard, 2013). This can only be verified by a professional, who has extensive knowledge in the field of accounting and finance. The professionals have the knowledge and experience in order to make a proper judgement on the reports. It is just that, they need to understand the importance of their work and include the ethical norms while performing their duties. Conclusion Therefore considering all the discussion above we can say that though the stakeholders and other people have lost the trust on the professional judgement on the financial reports, still, the importance of the same cannot be denied. The opinion of the professionals will always be important in taking the financial decisions. But in order to enhance the quality of judgement and get back the faith lost, it is important to take certain steps. Establishment of framework, increasing responsibility and liability along with ethical education will help us improve the quality of judgement and reduce biasness. The use of financial judgement in financial reporting should not be reduced; it should be made better and reliable. References Girard, S. L. (2014). Business finance basics. Pompton Plains, NJ: Career Press.Ittelson, T. (2009). Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports. Franklin Lakes, N.J.: Career Press.Lerner, J. J. (2009). Schaum's outline of principles of accounting. New York: Schaum.Loughran, M. (2010). Auditing For Dummies? Hoboken, NJ: John Wiley Sons.McLaney, E., Adril, D. P. (2016). Accounting and Finance: An Introduction. United Kingdom: Pearson.Piper, M. (2015). Accounting made simple. United States: CreateSpace Pub.Sargeant, A. (2010). Fundraising principles and practice. San Francisco, Calif.: Jossey-Bass.Siciliano, G. (2015). Finance for Nonfinancial Managers. New York: McGraw-Hill.Strathern, M. (2010). Audit cultures: anthropological studies in accountability, ethics and the academy. London: Routledge.Taillard, M. (2013). Corporate finance for dummies. Hoboken, N.J.: Wiley.