FINANCE

Legal and Regulatory Compliance in Financial Statements



Legal and Regulatory Compliance in Financial Statements

Users of the Financial Statement and Information

One of the most basic requirements of the financial statement is that there must be some reasonability and conciseness in them, as there are many users of the financial statement. Users of financial statement are many, and these are users who have some knowledge and understand ability of overall operations of the business activity as well as they are clear about the concept of financial accounting and economics (Carcello et al, 1992, p.15).

There are many users of the financial statement. There are people who might be using them internally, as well as there are external users as well. Some of the internal users of the financial statements are:

Owners of the Business

To make sure that all the operation of the business are being run efficiently and effectively, managers and the owners of the business need to look at the financial statements of the business. They need financial statement to have better perspective of the business's financial performance (Carcello et al, 1992, p.15). Financial information is also needed to formulate and finalise some of the contractual payments. Thus managers are important user of financial statement. It also provides investment solutions to the organizations. For instance, the overall efficiency and asset allocation that has been achieved, management of the inventory, overall turnout ratio's are all such things that can be tackled rather well by managers and owners of the business if they are more aware about the financial statements (Carcello et al, 1992, p.15).

Employees

Financial report is of great value to the employees. They are in a better bargaining position if they know about the financial statement of a firm. When matters of promotion, increment in the wages and salaries is brought up in the organization, overall knowledge about the financials of the organization would be very beneficial.

External Users

When we look at the external users of the financial statement, it can be seen that there are varied users of financial statement. Some of the external users of financial statements are:

Institutionalised Investors

Investors may use the financial information and statements when they are evaluating the financial strength and viability of the organization. When investor is more aware about the financial information, they will be in a better position to assess the financial strength of the organization (Carcello et al, 1992, p.15).

Government

Governments administer at the financial statements and information of many firms in a bid to make sure that their tax bills are paid in accordance to their financial strength.

Financial Institutes

Many varied financial institutions like banks and other DFI's may use financial information when they have to look at the overall credit worthiness of the organization. The evaluation of the working capital and overall evaluation of whether debt can be issued to such organization can only be analyzed by looking at the financial information (Carcello et al, 1992, p.15).

General Public

General media and public also look at the financial ...