Financial Accounting Reports - Essay Example

Financial accounting as a process mainly produces three types of reports: These statements are produced according to the Generally Accepted Accounting Principles (GAAP) either quarterly or annually. As aforementioned, these statements are meant for parties outside the firm and these include investors, regulators, creditors, and tax authorities. In different places of the world, there are different designations for the financial accounting practice such as the CPA (Certified Public Accountant) in the US, and the Chartered Accountant in the UK.

Krantz (2012) gives an analysis of the importance of financial reports to investors by emphasizing on the importance of knowing what one is looking for in these reports lest one gets totally lost. A company can release a wide range of reports from quarterly to annual reports. Krantz argues that the reason why it is important for an investor to scrutinize these statements is because they are the most critical sources of information that can be gotten by an investor from a company. Reading these reports makes an investor have a grip of the proceedings of the organisation in which they have entrusted their money.

Another party to which these statements are important to is the tax authorities. Since these statements declare the financial position of the organisation, they are important to tax authorities since they assist the authorities to make sure that taxes that have been paid are accurate and that the company has met its total tax liability. The process of preparation of audits is regulated by many laws and regulations which vary from country to country. The laws and regulations that affect an entity determine numerous factors one being the amount reported and the disclosed by an organization in its financial statements.

There are other laws and regulations that organizations are supposed to comply with or use as the basis of setting provisions within which the firm are to carry on with their