Lack Of Transparency In Financial Accounting

Frist World War there was a much stricter attitude to tax collection.

Continuing on to the 1970`s, technology, the expansion of the economy and foreign direct investment offered new opportunities. Firms began to recruit experts and rewarded young, active partners and accountants expanded their services and began to specialise this equalled a positive growth in Irish companies.

Relevance principle is one of the most important qualitative characteristics of Financial Statements, firstly the information must be of use to investors or credit, to insure this FASB are committed to financial reports being relevant to users. To explain simply, if the users decision would not be affected by the information given it can be excluded from the financial

Financial transparency refers to being honest about the performance of the business, even if the results are subpar, although most companies are rewarded for their honesty and full disclosure, as transparency is usually rewarded in stock performance. Transparency is essential in an efficient market, in the example of business, investors should avoid a lack of transparency in their operations, strategies or financial statements. Lack of transparency may obscure an investor’s view from bad debt, if a business is withholding information it is impossible for an investor to make an informed decision, also they are unable to survey the risk of bankruptcy. Furthermore, a company with a convoluted business structure and mysterious finances are a riskier investment. It is important to remember transparency prevents corruption, this is inevitable when only a few have the right of entry to certain information. A small proportion of businesses intentionally defraud investors or in other cases businesses dispense misleading information but still adheres to legalities. Finally, it is best when financial reports provide a truthful transparent view into a company’s growth, it makes an analysis easier for

Understandablity is key to the clarity and quality of the accounting information provided. Events and business transactions must be accountable at the end of each period to insure transactions are reported correctly, concisely, and in comprehensible fashion. This insures users who hold a level of knowledge of economic activity and accounting will be capable of understanding and reviewing the company and information. Furthermore, the information contained must be of relevance to its user, for example if the information is incomprehensible, or the information is presented in the company’s own specific manner for the user to understand this would undermine the reliability and understandability of the financial statement because the user would have to make an uninformed decision based on undependable information. Understandability doesn’t recommend that complex information be omitted because of its difficulties in understanding, rather the data be systematically disclosed rather than haphazardly presented. For example, the period the financial statement will cover, notes to be numbered an information cross-referenced to the balance sheet and income