Читать книгу Reading Financial Reports For Dummies - Lita Epstein - Страница 29

Every public company's internal accounting team and external audit team must answer to government entities. The primary government entity responsible for overseeing corporate reporting is the SEC. Its staff reviews reports filed with the SEC. If SEC employees have any questions or want additional information, they notify the company after reviewing the reports.

Financial statements filed with the SEC and for public consumption must adhere to the generally accepted accounting principles (GAAP). To meet the demands of these rules, financial reporting must be relevant, reliable, consistent, and presented in a way that allows the report reader to compare the results to prior years, as well as to other companies’ financial results. To find out more about GAAP, turn to Chapter 17.

With GAAP in place, you may wonder why so many accounting scandals have hit the front pages of newspapers around the country for the past few years. Filing statements according to GAAP has become a game for many companies. Unfortunately, investors and regulators find that companies don't always engage in transactions for the economic benefit of the shareholders, but sometimes do so to make their reports look better and to meet the quarterly expectations of Wall Street. Many times, companies look financially stronger than they actually are. For example, as scandals have come to light, companies have been found to overstate income, equity, and cash flows while understating debt. I talk more about reporting problems in Chapter 22.