ACCT 2510 Chapter Notes - Chapter 1: Ender Wiggin, International Accounting Standards Board, Information Asymmetry
Document Summary
Because resources are limited, people try to conserve then, use them effectively, and identify and encourage those who can make efficient use of them. The debt and equity marketplace includes both public stock markets/exchanges and private sources. Providing an effective system to facilitate capital allocation is critical to a healthy economy. Parties who have something at risk in the financial reporting environment, such as their salary, job, investment, or reputation. The broader definition of users includes anyone who prepares, relies on, reviews audits, or monitors financial information. The auditors also review the information to ensure that it reflects sound accounting choices. Investors and creditors rely on the financial statements to make decisions. Securities commissions and stock exchanges monitor the financial statements to ensure full and plain disclosure of material information. Credit rating agencies monitor and analyze the information produced by the company. The objective of general-purpose financial statements is to provide financial information about the reporting entity that is useful.