Accurate information

Accurate information – The principle that financial reporting measurements should be accurate seems to be indisputable, though because such measurements are often subjective or matters of convention, accountants are sometimes reluctant to use words like accuracy in case they give a misleading impression of certainty or objective reality.

Some commentators regard accuracy as merely an aspect of reliable information rather than a desirable characteristic in its own right (see reliable information).

Just some examples of why accurate information might be important!!

‘Recent’ crisis involves the actions taken by Toshiba Corporation in the wake of an accounting scandal. Between 2006 – 2014 Toshiba overstated operating profits by more than $1.2 billion. Unethical behavior intended to break the rules and regulations to manipulate information was presented in the financial statements. The financial statements did not present accurate and useful information.

Such accounting scandals were due to the lack of financial transparency, imperfect regulations, and unethical behavior. Furthermore, in the aftermath of Enron, WorldCom, and other corporate scandals, the call went forth from various stakeholders for more “transparency” in accounting, auditing, and corporate governance. In the meantime, academic accountants began the task of identifying the attributes and mechanisms of corporate transparency.

In the end, the US was to rule out Sarbanes-Oxley Acts to create transparency in financial reporting and business operations in a more ethical manner. Sarbanes-Oxley Act section 404 provides established internal controls and procedures for financial reporting and documents. It also tests and maintains internal controls and procedures to ensure their effectiveness.

Together, section 409 and Securities and Exchange Commission (SEC) require annual financial report disclosures for information transparency because information transparency plays an important role for its users, as most users require financial statements to support their decision making in the future. Nevertheless, not only more information transparency is needed, but also accurate information. Therefore, information transparency is an important issue for all companies because it helps to build stakeholder’s confidence in their investment decisions.

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Accurate information

Accurate information

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