Question

Critically explain the importance of considering the audience for financial statement analysis

Answer 1

Accounting is the language of business, and a company’s financial statements are its way of communicating accounting information to its owners and the taxing government,” says Thomas R. Ittelson

Financial statement analysis is the process which analyzes a company’s various financial documents in order to give the right information for right taking decisions about that business.

There are many users of the financial statements like Company management, Competitors, Customers, Governments, Investors, Lender, Suppliers, Unions etc. are also called audience for financial statements.

While considering the audience for financial statement analysis having following criticism:

1. Analysts can’t use technical words to explain the statement because the audience can’t understand.

2. Channel of communication should be available for the majority of users, which is not economical sometimes.

3. The cost of providing annual reports.

4. Sometimes shareholders from foreign countries are not familiar with Host Country's accounting standard.

5. Language may be another barrier to understanding the financial statements for the audience.

6. Most of the audience prefer quality information which sometimes is not possible.