Financial Accounting and-or Reporting Draft

Financial Accounting and/or Reporting Draft




Executive Summary

Financial accounting is a very important field in any financial institution and all strict GAAPs(Generally Accepted Accounting Principles) have to be adhered if anything substantial has to be attained at the end of it all. Financial accounting involves all accounting book principles that form part of the legal requirements in the 10K and 10Q reporting done in the US. Investors and creditors also need to know the accurate state of the company books so that they can make informed decisions thus leading to the success of the company. Auditing needs are also crucial in this field as they accounting books and reporting form the core of this. Companies and businesses should always be careful to be getting a clean bill as it boosts their confidence.

The various ways to detect fraud and misleading information that leads to fraud and methods of detecting it early stages before it actually happens is the key success. This paper will put that into perspective and the various steps in handling it. It also focuses on the loopholes that might exist in a business that might encourage fraud or its existence in the reporting from personal mistakes, financial shortfalls to operational shortfalls.

Financial Accounting adds value to companies in many ways. Accountants, CEO’s, Managers, and other financial representatives are expected to perform an analysis of the company’s financials and then report on the financial health of the company through Financial Accounting and Reporting. It is expected that those representatives are competent and have the appropriate knowledge and expertise to perform the analysis and give sound judgment. The results of their representations are then formed into what is the 10k and 10q, reporting to investors and others the financial health of the company. Unfortunately, the 10k and/or 10q may not be sound and may lack negative information, such as decreased earnings or loses. The misstatement of a company’s financials “can be classified as either fraudulent financial reporting or misappropriation of assets, or both” (Mock, 2004). In an effort to reduce the potential of fraudulent financial accounting and reporting internal controls, internal and external auditing and other forms of detection are put in place to produce sound financial reporting.


Financial accounting and reporting is of great importance and companies focus on this more and how it is done since it forms the basis of many financial decisions and investment. For this reason investors have opted to major on the factual information and scrutiny of what is presented to them to detect and prevent fraud at its early stages if any and lead to making wise decisions in the form of hiring of new management in the day to day running of the company. This has even lead to complete reconsideration of investment in totality by these investors. Due to this fact and many more, scholars have chosen to research and provide their finding on this topic and most have provided desirable solutions but not short of shortcomings and challenges in their implementation in one form of another as they will be discussed in detail in this literature review that follows. I have also delved into it in this masters report to shade some light and understanding on the topic postulated

Review of the literature

Many scholars have put their effort on researching on this topic and this is what is used in this analysis on the topic; Financial accounting and/or reporting. They have a lot of ideas on the topic and they are proofing to be a great resource in my research and study. I have borrowed a a lot as shown in the literature review below.

Adding Value as a Management Accountant – Business Partnering. (n.d.). Retrieved January 8, 2018, from

Abraham Kalungara puts his focus on the timely and accuracy presentation of financial reports by the accountants and managers. As much as I agree with this, I think there is more to financial reporting that just time. Financial information should involve all stakeholders so that everyone can achieve a consensus and understand why everything is as it is. I believe this model in addition to the ideas he postulates will give a better and a more modern view on accountability in financial systems and their reporting. Accuracy is a collective responsibility rather than an individual managerial responsibility.

Mock, J. M. (2004). Classic Case Studies in Accounting Fraud (Rep.).!etd.send_file%3Faccession%3Dmuhonors1111004894%26disposition%3Dinline

This resource gives a major focus on fraud and gives ca studies with the implications and end result of fraud. It aims at making people easily detect and stop fraud. It can also aid users to avoid and close loopholes that might provide a leeway for fraud through the case studies. I personally believe this is a good way of detecting and preventing fraud in companies and organizations. Employees should be aware of how to detect fraud by using real life cases and how they were solved. This makes it a great resource

What Is the Importance of a Company’s Financial Statements? (n.d.). Retrieved January8, 2018, from

This resource exemplifies the importance of relying on a company’s financial records in the running and day to day operation and also the investors. It tries to convince people to rely on financial records that are with the company. This is not limited to investors and other interested parties in the organization. I am personally nor against the use of such financial information in the way it is put but I think relying accurate information is better than just relying on any information out there. Any data must first be scrutinized for accuracy purpose then used wherever needed. If just used the way it is presented, inaccuracies and false information might be used in running the company. Sooner or later, the company will fall because inaccurate information was used in making decisions that had negative impact on the company due to misinformation. I would go for more scrutiny and verification before submission of this.

What Is the Value of Accounting Functions in an Organization? (n.d.). Retrieved January 08, 2018, from

Daphne gives the value of accounting and its functions in a business. He goes ahead to give the various branches which includes managerial, financial and even includes the tax. Their functions and responsibilities are clearly spelt out in the document. In the summary section, Adams gives the values contained in the various branches of accounting which includes planning, communicating, controlling, and profit determination.

I personally believe this kind of categorization is important since it gives the various functions and expectations of each department. This will ensure accountability and transparency though out financial accounting and reporting.

Young, H. D. (2016, June 20). Where Financial Reporting Still Falls Short. Retrieved January 08, 2018, from

Sherman and Young focuses on the type of mistakes that can occur in a financial statement. The article is very important in shading light on how unintended (mistake) and intentional (Fraud) and how they can be identified and rectified accordingly. The types of errors in here are Error of omission, error of commission and error of principle. Error of omission is the transaction that is not recorded. Error s commission is an transaction that is recorded incorrectly. Error of principle is a transaction that is not in accordance with Generally Accepted Accounting Principles (GAAPs). This resource is of great importance when discussing the errors that might occur in accounting books and the various ways to record them using trial balance etc and even referring them to ledger books. It improves accuracy in Financial accounting reporting and will go a long way in

Analysis and Recommendation

Financial accounting and reporting is a very field in accounting and investment. It highlights very many aspects of the company not limited to how it should be doing business and even change whenever needed. If company’s management find it necessary to involve stake holders in making decisions, they will always make reference to financial reports. Legal requirement by the government also necessitate this to help investors make their investment decisions. The legally mandated requirements are the 10Q, quarterly reports and 10K year’s reports. Financial reports are not only a legal requirement and investors reference guide. It is also needed by creditors who will need to know what and when to credit. This will protect them from losses that could if be incurred if the company winds up or delayed payment, (Abraham, 2014).

Misleading financial information normally occurs when the books of are edited to misrepresent the business. This normally results in figures that are either deflated due to theft of the business income or inflated to give false hope to creditors and investors. This activity is as expected illegal,(Justin, 2004). Detecting and preventing fraud should be dedicated to the a team especially audit firms that should regularly scrutinize books of accounts to keep this in check. People working with the company should also be aware so that they may report suspicious activities early on time. This helps save the company reputation and in the long run helps the employees retain their job considering that major fraud incidences lead the company being bankrupt and even winding up in the long run.

10K and 10Q Reports

10Q and 10K unaudited reports are a legal requirement in the United States. They are reports that should be presented to the presented Quarterly and yearly to the United States federal Securities and Exchange Commission and majorly help financiers make informed decisions. Preparing 10Q and 10K reports follow a specifically stipulated procedure and format an following this is essential. It also has a time period to which they are being prepared. Filer Definition and Accelerated Deadlines for Filing Periodic Reports (Jay, 2018), the current 10-K and 10-Q deadlines for accelerated filers are as follows:

Category of Filer Revised Deadlines For Filing Periodic Reports
  Form 10-K Deadline Form 10-Q Deadline
Large Accelerated Filer($700MM or more) 60 days 40 days
Accelerated Filer($75MM or more and less than $700MM) 75 days 40 days
Non-accelerated Filer(less than $75MM) 90 days 45 days

For good reporting and reporting deadlines must always be adhered to. To always keep this in check and to be on the safe side of the, maintain all recommended GAAPs standard and deadlines will be met without and hectic restraint on the deadlines. Young, (2016) recommends all standards be always followed so that filing and submission of requirements is made easier and submission of the 10K and 10Q reports.


According to the United States laws, there are very many consequences of committing fraud. The following items are first identified; Victim(s), fraudulent act, mechanism to identify and quantify a victim’s loss, suspect committing the crime, intent by the suspect committing fraud and evidence that the suspected benefitted from the crime. According to Daphne (2018), fraud indicators can be categorized into 3 main categories;

Personal mistakes – These are the indicators at and individual level and could flag the red flag for investigations to be considered. These are normally things that employees do and are considered abnormal or are not expected of them considering their job description.

Financial shortfalls

  1. -Living way beyond their means – Wealth declaration is normally encouraged in many companies before employment so as to give employers a true picture of what to expect of their employees. Sudden change of life style could indicate a fraud within the department the employee is assigned and investigation could start in their books of accounts that they are involved in. Historical data on such has shown that such behavior always act as lead to fraud identification.
  2. -High turnover of employees or personnel – Normal working situations lead to an average employee turnover given the average market reports. Whenever employees are reporting a high turnover and dedication, it raises the red flag in the institution.
  3. – Uncharacteristic pattern behaviors of employees – These are behaviors that are not normal in any working environment like abnormal association with outsiders, secret groups within the organization etc.

Operational downfalls

  1. -Unexplained entries or financial record changes – Includes entries that don’t make sense or do not have reason to be there is an indicator.
  2. -Unusually high amount of cash transactions – Businesses normally have expected amount of transaction and the amount in cast. When this limit is exceeded without knowledge of everyone or expectation of the transaction, it could indicate fraud and investigation should commence immediately.
  3. -Evidence of altered, missing or stolen financial records – Records changed are indication of suspicious activities and fraud. Company’s records are normally kept under tight security and getting lost is a sign of fraud.
  4. -Transactions that have taken place don’t have the proper transaction numbers or serial numbers

There are also methods of creating fraudulent financial statements and they include; Overstatement of assets, understatement of liabilities, overstatement of revenue, understatement of expenses, improper use of accounts meant for reserve, misinformation, failing to apply or applying wrongly GAAP rules (David, 2016). To address fraud, audits are normally done to identify and eliminate fraud and even form the basis of prosecution. Due to the extensive nature of businesses that exist nowadays, there are very many types of audits that can be done and includes; financial audits, Business system information audits, investigative audits, departmental review, business operations audit and investigative audit.

  1. -Lack of accounting and process control – Whenever there is no clear flow of events and process control leads to fraud
  2. -One person in control of the business with no separation of duties – One person controlling the flow from start to end can make them manipulate the system to their advantage and thus fraud. Many people in different departments and processes should be involved so that it can be easier to monitor buy studying different independent reports. Consistency means absence of fraud.
  3. -Financial accounting and the inventory of the business is not reconciled. Reconciling shows where errors and mistakes are. Failure to do this means that people responsible are hiding something and is an indicator of fraud.
  4. -One or more unauthorized transactions mean fraud.

Financial accounting is a field that that is of great interest and beneficial to the company that adopts strict financial accounting and recording and principles. It puts the company ahead in the competition and always accountable for its financial, operational and investment revenue expenditure. It is profitable in the long run.


Financial reporting as proven in the paper and in real world life is very important in the running of any organization. As I have show in the paper, it can help an organization identify loopholes, shortcoming, fraud and even act as control measure for the organization. They can also help the investors in making financial decisions as they are crucial in determining the financial health and return on the investment made on the company. Other stake holders like creditors are also of importance here since they use the information from financial accounting and reporting to gauge if they are going to lend to the company or not

10K and 10Q reports are also essential for legal compliance and regular update on the finical position of the company. As they are unaudited, they give the true picture of the organization and are crucial when potential investors are making finical decisions. Fraud can also easily be detected by using financial accounting and reports. This is possible through the analysis of this report and thus giving the organization or business management and deep insight of what ever goes on.


In conclusion, it financial accounting and reporting is essential for the success of any organization or business. As has been discussed in detail in the paper, it is crucial taking into account all the steps during the creation of these reports. Management could make a good use of these reports t get a good view of the organization and make decision that could have a positive impact on the future of the organization. A good report will form the basis of a good organizational future, a bad one lead to the failure though bankruptcy or mismanagement because the inappropriate decisions were made. It is also crucial as noted for investors and other stakeholders as they use them in making their day to day financial decision and helping the company grow in the long run. Abiding by the legal requirements of the land is also achieved through strict adherence to financial accounting and reporting principles.


Adding Value as a Management Accountant – Business Partnering. (n.d.). Retrieved January 20, 2018, from

Mock, J. M. (2004). Classic Case Studies in Accounting Fraud (Rep.).!etd.send_file%3Faccession%3Dmuhonors1111004894%26disposition%3Dinline

What Is the Importance of a Company’s Financial Statements? (n.d.). Retrieved January 20, 2018, from

What Is the Value of Accounting Functions in an Organization? (n.d.). Retrieved January 20, 2018, from

Young, H. D. (2016, June 20). Where Financial Reporting Still Falls Short. Retrieved January 20, 2018, from