Hi Max. You made a very interesting point regarding reliability! Anytime we are making computations for...

Hi Max. You made a very interesting point regarding reliability! Anytime we are making computations for the purposes of financial analysis, evaluation, or projections, we are somewhat at the mercy of the accuracy of those input figures. If the figures used for our input are unreliable, then our results could be useless or downright misleading. Class, with that being said, when computing projections or indicators, what responsibility does a given analyst have to confirm or further verify the reliability of those input figures?

Expert Solution

Financial analysis, evaluation, or projections are very important factor in business analysis and forecasting because financial information about a company does not say itself. In other words we can say that stakeholders of the financial statements mostly rely on the analysis & evaluations of the financial statements, apart from this projections regarding business activities are also very useful for business operations because on the basis of projections, business can be moved smoothly.

Now come to main issue, what responsibility does a given analyst have to confirm or further verify the reliability of those input figures?

As we know that reliability is must for financial analysis, evaluation, or projections because without realiability performed analysis, evaluation, or projections may be misleading hence it is must for the analyst to make sure about the realiability of the input figures. We know that realiability of the financial analysis, evaluation, or projections totally depend on the accuracy of the financial inputs. So analyst should see that whether there are audited financial statements were used for the financial analysis, evaluation, or projections or not. If financial statements or financial inputs are not audited then we can say that financial analysis, evaluation, or projections will be misleading due to unrealiable financial inputs.

So it is responsibility of the analyst to double check about the accuracy of the inputs through seeing auditing status of the financial statements, or should compare the financial information of the company with previous years, or should compare financial inputs with the standards of the industry, or should check with the prevailing accounting fundamental principles. These all will help in knowing the accuracy and relaibility of the inputs or financial inputs.

jeff jeffy answered 2 years ago

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