Misrepresentations of Financial Statements

A vested interest in maintaining their own credibility in such regard so that the shareholders keep electing them every time the elections for the board of the management is held. In case of any kind of misrepresentation found in the financial statements, they shall be severely liable for not fulfilling their duties and the responsible individual managers are likely to penalize for not being reliable in dealings with the external parties. The parties such as banks and financial institutions that are interested to provide funds to the firm and other individuals interested to invest in the firm or often require third parties to attest the financial statements served by the firm for reliance in the information provided. External audit firms, investment bankers and underwriting firms provide these certification services. Various clients are served by these third parties and thus they are strongly interested in maintaining their reputation and credibility with the financial community. The report provided by these third parties serves as reasonable assurance in the true and fair disclosure of information in the financial statements. In case of any discrepancy found in the financial information provided by the firm, the reports on the financial statements shall not be clean. Thus adversely affects the credibility of the firm. In case of any fraudulent or misrepresentation of information found in the financial statements served by the firm, there are heavy penalties for the persons responsible for the fraud which may lead to even insolvency of the firm. In case of any incorrect forecasts of earnings per share of the firm disclosed in the financial statements, the users of the financial information may incur losses for their investments in the firm based on the incorrect forecasts.