Acca financial Accounting (FA) Study Text ac ca (FA)

 

 

 

---

 

Chapter 2 

KAPLAN PUBLISHING

 

31 

 

The current financial reporting environment 

 

Recent history has been dogged with examples of unreliable, and often 

fraudulent, financial reporting, where directors have put their own 

personal interests above those of the shareholders. Enron and 

WorldCom are just a couple of examples, albeit very high profile ones, 

where directors have been convicted of manipulating published results 

and therefore misleading shareholders, often at very significant personal 

gain. 

These cases only serve to exacerbate the problem of shareholder 

confidence, creating a culture of mistrust in the directors (and auditors) of 

large companies. This has sadly led to a loss of credibility in published 

financial reports. Whilst the various regulators around the world have 

responded, not least with the move to harmonise both financial reporting 

and auditing, there is still a long way to go in the fight to restore credibility 

to financial statements.