Question

Why do governments publish audited annual financial statements? How does a CFO know what information financial statements should contain and how that information should be presented?

Answer 1

ANSWER

Financial statements are the statements which are prepared and presented in the prescribed form so as to enable decision making by stakeholders. When the financial statements is examined by independent auditor, financial statements get audited. Publishing audited financial statements by the government is important due to various reasons.

Audited statements adds credibility to the reported financial position and business performance. It ensures that prescribed general accepted accounting rules are followed while preparing statements. Citizens of the country believe on the system of government of their country, so, by publishing audited statements it helps Stakeholders to make informed choices. Audited financial statements assurance that public funds and resources have been used in accordance with the law, managed to good effect and properly accounted for. In addition, audits identify issues which can assist public bodies in improving financial management, governance and propriety in the conduct of public business. Audited financial statements are the indication of effective management of public funds.

CFOs are responsible for managing financial activities of the company and to ensure financial records are in order. CFO's role is not only limited to accounting, they also help companies to make strategic decisions by taking an active role in financial analysis and management. whatever information, that CFO thinks is critical for the stakeholders to take informed decisions, is required to get reflected in financial statements. By being proactive, CFO takes financial decisions keeping in mind the future uncertainities. CFOs align their strategies or decisions with the vision and priorities of the company. Hence, they focus on presenting information in financial statements in a way that would lead to fulfillment of long term objectives of the company. Moreover, information in the financial statements should be presented by applying generally accepted accounting principles.