INTRODUCTION TO FINANCIAL REPORTING ANALYSIS
Financial reports are important sources of information for analysts. The past
and present performance of a company or subsidiary is studied through
financial reports, and future performance is then assessed. Management
should establish and maintain adequate internal control over financial
reporting, and an audit report will give one of three opinions: a qualified,
unqualified, or adverse opinion. Audit report also includes a discussion of key
audit matters, which are issues that the auditor considers to be most
important. Key audit matters are defined as those that have a high risk of
misstatement and involve significant management judgment or transactions
during the period. Other sources of information include interim financial
reports and proxy statements.
Financial reporting is the process of turning raw data into understandable
information that can be used by shareholders, creditors, and other interested
parties. Financial analysis is a broader field that looks at financial reports and
other information to assess whether or not to make an investment. There are
four key financial statements: the income statement, the balance sheet, the
cash flow statement, and the statement of comprehensive income. Each of
these statements is backed up by a tremendous amount of information in the
footnotes and supplementary schedules.
OBJECTIVES
In this reading, we will discuss the objective of financial reporting. We will
then discuss the distinction between standard setting bodies and regulatory
authorities. This reading focuses on the context within which the standards
are created. The objective of financial reporting is to provide financial
information useful to users. If you are a financial analyst you are comparing
these two companies from economic perspective. When companies are
performing similar economic transactions those transactions should be
reported in a similar or comparable manner. Financial reporting standards
Financial reports are important sources of information for analysts. The past
and present performance of a company or subsidiary is studied through
financial reports, and future performance is then assessed. Management
should establish and maintain adequate internal control over financial
reporting, and an audit report will give one of three opinions: a qualified,
unqualified, or adverse opinion. Audit report also includes a discussion of key
audit matters, which are issues that the auditor considers to be most
important. Key audit matters are defined as those that have a high risk of
misstatement and involve significant management judgment or transactions
during the period. Other sources of information include interim financial
reports and proxy statements.
Financial reporting is the process of turning raw data into understandable
information that can be used by shareholders, creditors, and other interested
parties. Financial analysis is a broader field that looks at financial reports and
other information to assess whether or not to make an investment. There are
four key financial statements: the income statement, the balance sheet, the
cash flow statement, and the statement of comprehensive income. Each of
these statements is backed up by a tremendous amount of information in the
footnotes and supplementary schedules.
OBJECTIVES
In this reading, we will discuss the objective of financial reporting. We will
then discuss the distinction between standard setting bodies and regulatory
authorities. This reading focuses on the context within which the standards
are created. The objective of financial reporting is to provide financial
information useful to users. If you are a financial analyst you are comparing
these two companies from economic perspective. When companies are
performing similar economic transactions those transactions should be
reported in a similar or comparable manner. Financial reporting standards
