1 Qualitative characteristics of accounting information Form the figure 1. Above has showed the processes of characteristic in fundamental qualitative that are described following by the section. - Relevance: This is the information that relating to make the financial statement of user decision differencing from the opponents. Predictive value is part of relevant information to help users evaluating the potential effect of past, present or future transaction event on the future cash flows. In addition to, the confirmatory value is helping them to confirm or revise their previous evaluations.
Historical Accounting Versus Fair Value Accounting A company’s financial statements offer numerous types financial information that stockholders and creditors use to determine a company’s economic wealth. Financial statements also deliver past performance results along with future financial abilities. The information obtainable in a financial report is governed by laws and/or by accounting standard practices. Accounting information should be consistent to a degree and should be confirmable as well as good faith reporting. Trustworthiness is inevitability for companies or businesses that have experienced financial officers to evaluate the truthfulness of the company’s financial information.
By applying the matching concepts, the bookkeeping is requiring to record the revenue and expense in the same period. The matching principle is to ensure the profits are accurately reported for each accounting period. For this reason, the accrual accounting method requires end-of-period adjustments to be made to the business revenues and expenses while the cash method does not. These end-of-period adjustments create accounting transactions known as accruals (Baskerville,
The users of financial statement require that they be truthful so that they do not make bad decision as a result of poor information. Accounting and financial information is should provide financial statements that are useful in the making of informed economic decisions. The main objective for the preparation of financial statements is which show the real financial position and performance (IASB, 2001). It is the duty of the audit committee to see that the financial information in the financial reporting accurately presents the true financial position of the company. A study done by Al-Shammari et al.
Central to the following discourse would be the money measurement assumption where accounting profit precludes non-monetary elements such as opportunity costs to ensure consistency with part one of the assignments. Reliability of accounting profit – Self-regulation via ethical codes Before being considered a measure of the true profit, reliability of profit figures shall be assessed. As highlighted above, regulators are powerful in a way that profit is ‘the outcome of applying particular accounting rules and conventions … when these rules change, the same series o... ... middle of paper ... ...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306.
Auditor regulation ensures that the fundamental principle of accounting, objectivity and integrity is maintained. Auditors should remain objective when conducting the financial report, failure of being objectiv... ... middle of paper ... ...bility and reliability of the financial report is crucial as it also directly affects the users of the financial report, such as shareholders. Regulation can ensure that reliability and credibility maintained to high standards. Auditors can fulfil their required job whilst being unregulated, if they remain both professional and ethical. Adding on, external regulation has proved to be faulty at times, which is significant as a lot of time and money is gone into regulating auditors and clients.
By providing objective, and unbiased valuations of whether resources are effectively, economically and efficiently managed to attain planned results, both audit functions assist organisations to achieve integrity and accountability and infuse confidence among internal and external stakeholders (Van Rensburg, Oosthuizen, and Coetzee, 2016, p.191). Internal audit is often overlooked in the financial reporting process. We have noted that one of the objectives of internal audit function is to ensure that key operational, managerial, and financial information is accurate, timely, and reliable. Thus, internal audit is the first layer of objectively examining financial statement preparation process. While external audit is also required to review and evaluate the internal controls to the extent the internal controls should be relied on during performing a financial audit (Davies & Aston 2011).
Relevance is used during trend analysis of financial information while reliability ensures the development and sustenance of accurate accounting information. In addition, relevance also ensures that accounting information is available to users at the appropriate time in the decision making process. In conclusion, accounting information consist quantitative and qualitative characteristics, which play a crucial role in the use of accounting information. Generally, qualitative characteristics are attributes associated with the seeming importance of financial information and used for decision making. Some of the major qualitative attributes of accounting information include reliability, relevance, consistency, understandability, comparability, and usefulness.
Balance sheet, Income statement, statement of cash flows, and statement of stockholders’ equity The balance sheet is one of the major financial statements used by accountants and business owners. The balance sheet displays an organization's fiscal position at the finish of a specified date. Some depict the asset report as a "preview" of the organization's budgetary position at a focus a minute or a moment in time. The income statement is imperative since it demonstrates the benefit of an organization throughout the time interim specified. The period of time that the statement spreads is picked by the business and will differ.
This helps keep consistency with financial statements or reports that are written by companies or accountants. International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are different because the GAAP is a ruled based because they use a set of guidelines and objectives and IFRS is principal based and has a different set of standards that they follow. The GAAP being more of a rule based means that they follow a list of comprehensive rules and these rules must be followed in order to accurately prepare and report financial