There are several very
important general drawbacks of published financial statements. These are
highlighted in the following points.
important general drawbacks of published financial statements. These are
highlighted in the following points.
1. They are often out of date by time they are published.
2. They
are not audited in full, but only as far as required by statute so that the
audit is not a guarantee that the accounts are correct.
are not audited in full, but only as far as required by statute so that the
audit is not a guarantee that the accounts are correct.
3. Some
management lapses may not be present in the information contained in financial
statements but contained in domestic reports presented to management for their
internal use only.
management lapses may not be present in the information contained in financial
statements but contained in domestic reports presented to management for their
internal use only.
No wonder in spite of many
unqualified audit report of many commercial banks in Nigeria, some of them
became distressed after their ‘favourable’ annual accounts and reports were
published.
unqualified audit report of many commercial banks in Nigeria, some of them
became distressed after their ‘favourable’ annual accounts and reports were
published.
4. Accounts are record of past, not a predictor of the failure.
5. Accounts
can only show the performance and standing of a business in financial terms and
they cannot place a value on the staff or customer base, nor asses the business
competition.
can only show the performance and standing of a business in financial terms and
they cannot place a value on the staff or customer base, nor asses the business
competition.
6. Although
the companies Decree and accounting standards are very detailed, they sometimes
leave room for choices of accounting treatment and they do not cover type of
financial transaction encountered in business.
the companies Decree and accounting standards are very detailed, they sometimes
leave room for choices of accounting treatment and they do not cover type of
financial transaction encountered in business.
7. Accounts
do not show the effects of inflation on a company’s financial position.
do not show the effects of inflation on a company’s financial position.
