Question

The long-term success of a company is of particular interest to both internal and external users of financial statements. The long-term success can be highlighted through the types of assets they have along with the Retained earnings of the company. The liabilities are however a direct reduction of these two items. How would you go about indicating to investors that all account balances are valid and free from potential errors? What types of financial records and information would you use to support your claims? Explain. (Please give a thorough explanation.)

Answer 1

Answer- Investor invests money in organization to earn investment income. Company use this invests money in his business process and earns profit. So Investor invests money in company securities, only if he satisfied that company business have very good fundamentals. For this purpose he analysis financial statement of company. This is responsibility of organization management that he should indirectly satisfie investor that financial statements and financial data are correct, accurate and reliable. For this purpose management should comply with following measures which would satisfied investors –

•All financial statement is audited by qualified CPA and follows all the suggestion given by auditor to management.

•Company is using double entry system to get accurate financial results of current period business process.

•Management should ensure that financial statement presenting and disclosing true and fair position of organization.

•Management should establish an internal and concurrent audit department in organization and give responsibility to verify all financial transaction are correctly recorded, presented, disclosed by accountant. Take weekly, monthly reports to remove all weakness and limitations.

•Organization should design and follows high slandered authentication and authorization procedure to record and post any transaction in financial statement.

•Accountant have comply all related rules, regulations, principles, laws applicable to organization.

We should use following financial records and information to satisfy investor that all account balances are valid and error free.

•Journal and subsidiaries books with source date of truncations.

•Details of posting of each ledger account.

•Matching of debit and credit side of trail balance.

•Details of income statement.

•Balance sheet of organization.

•Compliance report given by organization to various regulatory authorities

•Statement of cash flow and trend analysis.