Free Custom «Financial Reporting in Public Accounting» Essay Paper

Public accounting and financial reporting are directly related and work together. Their relationship makes it difficult to research on one of them and leave out the other, thus leading to a research on both of them and how they affect each other and their contribution to decision making. The main purpose of this research is to establish the relationship between public accounting and financial reporting and the role both disciplines play in decision making regarding companies, private entities and individuals in the field of investment and profit/loss earning, thus giving the research question:

What is the relationship between public accounting and financial reporting in the field of company, private or individual investment?

In order to acquire more precise and detailed results of the problem, the following sub-questions will assist in the evaluation:

1. What is the relevance of financial reporting in public accounting?
2. Are poor investment decisions seen in the past a result of poor financial record keeping?
3. What is the effect of improving and standardizing accounting procedures to investment?
4. What are the necessary measures that need to be undertaken to improve the public accounting sector?

Adequate literature relating to financial reporting and public accounts exists globally. The two disciplines provide a platform for accountability and transparency in the corporate or private entity institutions. It is especially important in private institutions because generally, private investors are keener to find out how their hard earned cash is being spent. Any misappropriation of funds automatically leads to withdrawal of their support. Thus, the importance of transparency in financial reporting and public accounting cannot be overemphasized. This study will highlight how public accounting and financial reports have been helpful to both national and international parties in investment, cost reduction, policy making and profit maximization decisions (AICPA, 1982). Internationally, a lot of information is available concerning public accounting and financial reports. Accounting principles and models have been created and enforced for the sole reason of assisting parties that are in need of an institution’s works of accounts. A good example is the GAAP (general accepted accounting principles) which is applicable globally in any jurisdiction (AICPA, 1982). This also helps to ensure financial integrity and accountability. Therefore the main role of the accounting records is accountability.

 

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This study can be regarded as significant or relevant based on the fact that public accounting is a priority in all national and international levels. Proper monitoring of accounting procedures gives accurate decisions to involved parties (Maurice, 2000). However, the system has potholes and weaknesses within it. Weaknesses may be genuine errors or malicious plots which may be in the form of incorrect profit announcements with the aim of tax evasion and a significant study is therefore needed to streamline the processes of public accounting and financial reporting. Fraudulent reports and accounts may lead to negative consequences to a corporate group or even a private company. Some of these consequences are legal bindings, huge fines, a company being forced to shut down, etc. This could taint a company’s image and turn away investors and potential shareholders, leading to loss of business opportunities. In light of this, scholars invented forensic accounting to try and mitigate frauds and malicious errors in any stage of data entry in the accounting process. A deep study in the whole processes mentioned above would therefore provide effective and efficient records of accounts to be used in other areas of management and product delivery. In addition to the above mentioned, establishment and success of any given company largely depends on the effectiveness of its financial accounting procedures. Creation of accounting regulatory and monitoring bodies like GAAP, GASB (governmental accounting standards board), FASB (financial accounting standards board) and IRS (internal revenue service) has been regarded as quite helpful to corporate or any financial institutions due to the standards set. Informed decisions are therefore easier to arrive at with the help of such agencies. This study will show their importance and highlight the problems likely to affect effectiveness of the regulatory bodies. This research study will also advise on how companies can achieve maximum results from the assistance provided by the accounting monitoring agencies.