Need For Financial Statements Analysis

663 words - 3 pages

Wake up call to prepare and make use of Financial Statements Analysis:
By CPA, Simion Kirui, Member Institute of Certified Public accountants -Kenya
Key topic questions:
1. Should Companies issue financial statement discussion and analysis when it issues financial statements?
2. Is there adequate use for Financial Statement Analysis?
3. Will one claim to have understood financial Statements in absence of Financial Statement Analysis?
4. Should Financial Statement Analysis be presented alongside Financial Statements as a good Practice especially for public entities?
Financial statement analysis is used to identify the trends and relationships between financial statement items. Both ...view middle of the document...

But Are the basic four financial statements and notes to accounts adequate for users of a firm’s financial data? Obviously, the four are basic and there is there is need for more seriously!
As per IFRS, the main characteristics required in its main financial statement forms include:
1. Understandability
2. Relevance
3. Reliability
4. Comparability
But is there Understandability, Relevance, Reliability and Comparability without Discussion and Analysis of Financial Statements?
Most financial statements presented in Annual General Meetings do not include Analysis of financial statements and this may be part of the reason why shareholders Adopt accounts only to discover later than things were not as good as they though. In most cases shareholders have been used to rubber stamp accounts done by the management and the board because they lack capacity to understand and analyze the financial statements or have no adequate time. External auditors have in some instances issue unqualified opinion on companies that will collapse shortly after the audit because they make no use of financial statement Analysis as well. This does not over emphasize the need to use of Financial Statements Analysis to enhanced...

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