Financial reports refer to documents and records collected to helpone keep track and evaluate the amount of money a business is makingor loosing (Gibson, 2012). The main purpose of financial reports isto give crucial accounting information to lenders and stakeholders ofa business. Financial reports are also part of the contract wherethere are two or more business partners. There are many users offinancial statements, such as stockholders, bondholders, companymanagers, security analysts, employees, the general public and sonon. All these are both internal and external stakeholder groups inthe discipline of accounting. also includes theexternal financial statements such as income statements, balancesheets, statements of cash flow and statements of stockholder’sequity, amongst others. The ideas underlying financial reporting haveexisted for several years, and these developments continue modifyingthe present day accounting. This paper looks at the variousinstitutions for financial reporting, their advantages, and ananalysis of good and bad financial reporting examples.
Officesand bureaus of financial reporting
U.S securities and Exchange Commission Offices
This is an independent agency of the United States federalgovernment, which has offices for enforcing the securities laws ofthe U.S federal government, regulating the securities and handlingother accounting information for companies and other businesses inthe United States (Casenotes, 2009). The office was created as an actof the government in 1934. Its main functions are to maintain fairand orderly securities markets, protecting investors and facilitatecapital formation in the United States. So as to do this effectively,the agency has laws that make it a requirement for all publiccompanies to submit their quarterly and annual reports, alongside anumber of other periodic accounting reports. The agency’s officerswork together with the United States criminal law enforcementagencies to prosecute companies and individuals who fail to do this(Casenotes, 2009). The financial reports that are made to theseoffices are made available to the public for transparency andaccountability reasons.
U.S department of Interior Office of financial management
This office serves as the focal point for the department ofinterior’s financial matters (doi.gov, 2014). It does this byadvising, planning and being an oversight office for financial policyand procedures, financial reporting and accounting policy,audit-follow up and management control program. The office works withthe mission of financial management excellence and increasing valueby collaboration and continuous learning. One of the core commitmentsof the office is to strengthen financial management within thedepartment of Interior by a modernized and integrated financialsystem, enhancement of effective and sustainable management controlsand preparation of financial statements within the department. Theoffice is headed by a director who is answerable to the deputyassistant secretary for budget.
U.S census bureau
The U.S census bureau is one of the bureaus in the U.S that dealswith financial reports. The Bureau’s core functions are producingdata about the American people and the economy (Quinterno, 2013). Itproduces data for economic and foreign trade indicators that aregiven by the U.S federal government, some of which comes from thecensus bureau. The censuses and other related surveys that areconducted by the bureau are used to allocate billions of governmentfunds to states across America, help communities that are in need andalso helps major businesses operating country-wide to make importantfinancial decisions. The bureau has the legal mandate as constitutedin the Article I section II of the U.S constitution.
Significanceof the offices and bureaus
One of the significance of financial reporting offices and bureaus isto ensure that companies produce quarterly and semiannual reports,which are important for investors. This information helps theinvestors to make decisions when investing the capital market(Gibson, 2012). The information that is obtained from these companiesalso helps to avoid scandals. Also, financial reports exist primarilyto help all these entities to make accounting decisions. Forinstance, suppliers use the financial reports to make decisions onwhether or not to selling their merchandise to companies on credit,and so on. Offices and bureaus for financial reporting are also veryimportant to banks. The banks use the information from theseinstitutions to regulate loans and justify regulator’s decisions(Horizon Community Bank, 2012). To the business owners, these officesand bureaus helps them to approve banking records and loaning moneyfrom the banks. The information from these institutions also helpsexaminers and regulators to review loan files periodically, and tofile dated financial reports for future uses. Having financialreporting information helps investors and shareholders to act in aconsultative capacity as required, discuss any issues or potentialloopholes and be aware of future financial trends of everyestablishment. By providing current financial information, theoffices and bureaus help to significantly reduce the time it takesfor investors and shareholders to make accounting follow-ups.
Analysisof good and bad financial reports
A good financial report is one that gives credible and accurateaccounting information, usually provided in two types of reports,that is internal financial reports and external financial reports(Auditor General Victoria, 2005). The former is meant for managersand the later for the government. In order to ensure that a financialreport is useful, it must be relevant, understandable, comparable andabove all reliable. By reliability, it means that the informationcontained in it is accurate and unbiased, besides being free oferrors and mistakes. This shows the reality of transactions and allbusiness deals that have been made. An understandable financialreport enables the user to readily comprehend the meaning andsignificance of the report information. Those who prepare thefinancial reports must ensure that their work keeps in mind thecapabilities of their readers. A financial report that is hard tounderstand is quite unhelpful in accounting.
Atkins (n.d) says that America has been facing the problem of badfinancial reports from the corporate sector. This is regardless ofthe efforts that have been put by the Securities and ExchangeCommission to mitigate this corporate malfeasance. In this regard, abad financial report is a manipulative one, containing informationthat misguides auditors, corporate clients and other shareholders.The major reason for this is an attempt by corporate executives togive false information about the financial performance of a company.This is to give false impressions of established performance andbolstering their companies’ personal compensation. Bad financialreports do not articulate financial management responsibilities anddo not contain relevant information that can be useful toshareholders and stakeholders. In this regards, reports concerningaccounting information should have comprehensive and articulateattributes that demonstrate the real position of statements.
Adkins, T. (n.d). Financial statements manipulation an ever-presentproblem for investors. Investopedia. Retrieved on 12 November2014 from:http://www.investopedia.com/articles/fundamental-analysis/financial-statement-manipulation.asp
Auditor General Victoria (2005). Internal financial reporting inlocal government. Lebourne, Australia: VictorianAuditor-General’s Office.
Casenotes. (2009). Securities regulation: Keyed to coffee andsale’s securities regulation. New York, NY: Aspen Publishing.
doi.gov. (2014). Office of financial management. Retrieved on12 November 2014 from: http://www.doi.gov/pfm/index.cfm
Gibson, C. (2012). and analysis. Mason,OH: Cengage Learning.
Horizon Community Bank (May 2012). The importance of financialreporting. Newsletter Article.
Quinterno, J. (2013). Running the numbers: A practical guide toregional economic and social analysis. New York, NY: M.E Sharpe.