Question

Is it "buyer beware," or do you advocate for more checks and balances over financial practices?

Answer 1

Answer:

Financial practices refer to the standards and process for maintaining and presenting qualitative and fair picture of the business. Various statutory bodies are established for ensuring that all the business comply with defined set of standards for better control of financial practices. The statutory bodies have made it mandatory for following these practices. Since these are mandatory, the buyers or investors assume that operations and information are presented properly and there are no issues in the same. However, the business is exploiting these standards and presenting a not so fair picture of the operations. Investors or buyers need to be aware of the rules/checks and understand the operations instead of simply trusting the details presented. Due diligence should be exercised before taking any decision. However, the loopholes could be identified in the financial practices and more checks can be introduced for reducing the possibility of false presentation and improving the reliability. Further checks could reduce the due diligence of beware and cannot completely eradicate or avoid the same. Buyers should always be aware and exercise basic diligence and should not rely on the financial practices alone.