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Accounting, Finance, SPSS
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English (U.S.)
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Topic:
How to Determine the Accuracy of Financial Reports
Essay Instructions:
Question 3: Why should we spend significant amounts of resources investigating cost behaviour? It is much simpler just to use the traditional (full) costing method. Question 4: How do we know the figures reported in the accounts are true? These days it seems company directors can decide what profit they want to declare.
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Question 4 – Accuracy of Account Reports
Understanding how to determine the accuracy of financial reports is essential for every accounting professional, business manager, and investor, among others. It allows anyone to have a critical view and foresight of a company's capability to deliver the financial performance expected upon it by its investors, partners, and other stakeholders. However, inaccuracy in the reporting method poses a significant risk to the reliability of financial statements. These inaccuracies may exist in various forms within the financial statement and may be due to negligence or ill intent to boost profit reports. In this article, I would like to analyze how the accuracy of accounts may be determined in financial statements and some concepts that may be used for better Earnings Management. Knowing these fundamental concepts is crucial to critically analyze the viability and profitability of a company by reducing the risks of inaccurate reporting.
Determining Accuracy of Reports
One of the ways to determine the accuracy of financial reports is to determine their relevance. Relevance refers to the capability of "the accounting information to make a difference" (McLaney & Atrill, 2020). Specifically, relevance may be determined based on the company's present and past price actions. It is based on statistically viable and possible price movements that determine whether the currently reported accounts are made up.
Accordingly, one of the examples stated in the book was the use of regression methods to determine whether financial information had been altered. Whether in real life or in accounting, a certain level of 'predictability' exists similar to the concept of price efficiency (McLaney & Atrill, 2020). In the usual course of business, future costs, liabilities, assets, and profits, among others, should fall within an acceptable threshold based on past data reported in the financial information....
Subject and Section
Professor's Name
Date
Question 4 – Accuracy of Account Reports
Understanding how to determine the accuracy of financial reports is essential for every accounting professional, business manager, and investor, among others. It allows anyone to have a critical view and foresight of a company's capability to deliver the financial performance expected upon it by its investors, partners, and other stakeholders. However, inaccuracy in the reporting method poses a significant risk to the reliability of financial statements. These inaccuracies may exist in various forms within the financial statement and may be due to negligence or ill intent to boost profit reports. In this article, I would like to analyze how the accuracy of accounts may be determined in financial statements and some concepts that may be used for better Earnings Management. Knowing these fundamental concepts is crucial to critically analyze the viability and profitability of a company by reducing the risks of inaccurate reporting.
Determining Accuracy of Reports
One of the ways to determine the accuracy of financial reports is to determine their relevance. Relevance refers to the capability of "the accounting information to make a difference" (McLaney & Atrill, 2020). Specifically, relevance may be determined based on the company's present and past price actions. It is based on statistically viable and possible price movements that determine whether the currently reported accounts are made up.
Accordingly, one of the examples stated in the book was the use of regression methods to determine whether financial information had been altered. Whether in real life or in accounting, a certain level of 'predictability' exists similar to the concept of price efficiency (McLaney & Atrill, 2020). In the usual course of business, future costs, liabilities, assets, and profits, among others, should fall within an acceptable threshold based on past data reported in the financial information....
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