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Consider the following claim from a business observer:

"An accountant's job is to conceal, not to reveal. An accountant is not asked to give outsiders an accurate picture of what's going on in a company. He is asked to transform the figures on a company's operations in such a way that it will be impossible to recreate the original figures.

An income statement for a toy company doesn't tell how many toys of various kinds the company sold, or who the company's best customers are. The balance sheet doesn't tell how many of each kind of toy the company has in inventory, or how much is owed by each customer who is late in paying his bills.

In general, anything that a manager uses to do his job will be of interest to some stockholders, customers, creditors, or government agencies. Managerial accounting differs from financial accounting only because the accountant has to hide some of the facts and figures managers find useful. The accountant simply has to throw out most of the facts and some of the figures that the managers use when he creates the financial statements for outsiders.

The rules of accounting reflect this tension. Even if the accountant thought of himself as working only for the good of society, he would conceal certain facts in the reports he helps prepare. Since the accountant is actually working for the company, or even for the management of the company, he conceals many facts that outsider would like to have revealed.

Required:

a) Discuss this observer's misgivings on the role of the accountant in financial reporting.

b) Discuss what type of omitted information the business observer is referring to.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M943957

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