Financial Accounting Theory - Assignment Example

Although Finance and Accounting theories advocate for the usefulness of information by making financial statements easier to understand, that is not the case. Financial reports have become much more complicated to understand the value of such information hence have come under fire. Additionally, the dynamic business environment has changed the techniques applied to prepare financial reports. Furthermore, business models have become more advanced hence the need to change the traditional forms of financial reporting has been necessitated (Scott, 2011).

            The hypothesis made by auditors that all users of financial reports have knowledge of the business, and the economic activities that surround the business is a pure fallacy. Some of the users of the information include the shareholders of the company. A majority of the shareholders do not understand some of the terminologies used in financial reports. Mostly they depend on stockbrokers to interpret the information. In addition, a majority of them are interested in the profitability of the company and consider other information irrelevant to them.

Conversely, the premise is wrong and lacks validity (Cowperthwaite, 2014).