How to Read a Financial Report by John A. Tracy

Author:John A. Tracy
Language: eng
Format: epub, mobi
Publisher: Wiley
Published: 2010-05-11T04:00:00+00:00

The CPA auditor’s report covers footnotes as well as the financial statements.

In short, footnotes are necessary because the additional information provided in the footnotes is needed by financial statement readers. The overarching premise of financial reporting is adequate disclosure, so that all those who have a legitimate interest in the financial affairs of the business are provided the relevant information they need to make informed decisions and to protect their interests in the business.

Ideally, footnotes should be written in an understandable manner, and every effort should be made to use language and visual layouts and exhibits that are clear and reasonably easy to follow. In other words, financial reports should be transparent. The lack of transparency in financial reports has come in for much criticism, especially regarding footnotes that are so dense and obtuse that even a lawyer would have trouble reading them. More on this point later in the chapter.

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