Financial reporting involves communicating an organization's financial information to external stakeholders to aid in decision-making, primarily through key components like balance sheets and income statements. Audit reports provide opinions on the fairness of these financial statements, and creative accounting can manipulate this information to present a more favorable view, raising ethical concerns. However, financial statements have limitations, such as historical focus, reliance on estimates, and challenges for non-experts in interpretation.

1. Financial Reporting

2. Table of content
• Financial Reporting
• Key components of financial reporting
• Audit report
• Types of audit report
• Creative Accounting
• Is creative accounting an evil?
• Limitations of financial statements

3. What is financial
reporting?
• Financial reporting is the process of
communicating an organization's
financial information to external
stakeholders, such as investors,
creditors, regulators, and the general
public.
• The primary purpose of financial
reporting is to provide relevant and
reliable information about the financial
performance and position of the
company, enabling stakeholders to
make informed decisions.

4. Key
Components
• Financial statements:
1. Balance Sheet
2. Income Statement
3. Cashflow Statement
• Notes to financial Statements
• Audit Reports

5. Audit
Report
• An audit report is a formal document issued by an
independent auditor after conducting an examination
of an organization's financial statements and related
processes.
• The purpose of the audit report is to provide an
opinion on whether the financial statements are
presented fairly in accordance with the applicable
accounting standards.
• The report is a critical element in providing assurance
to stakeholders, including investors, creditors, and
regulatory authorities.

6. Types of audit
reports
• Unqualified Opinion
• Qualified Opinion
• Adverse Opinion
• Disclaimer of opinion

7. Creative Accounting
Creative accounting refers to the manipulation of financial
information by companies to present a more favorable
picture of their financial position and performance than
what it is in actual.
Examples of Creative accounting:
• overestimating revenues
• lowering depreciation charges
• delaying expenses

8. Is creative accounting an
evil?
While creative
accounting is legal,
it can lead to
accounting fraud,
which is illegal
Whether creative
accounting is
considered "evil"
depends on the intent
and consequences of
the practices involved
Creative accounting
can lead to the issues
of ‘ethical concerns’
and‘damaging of trust’

9. Limitations of financial
statements
Historical Information:
Financial statements primarily provide historical information about a
company's performance which may not necessarily predict future
performance.
Estimates and Assumptions:
Financial statements often include estimates and assumptions, such as
depreciation methods, bad debt provisions, and useful life of assets.
Qualitative Factors:
It ignores qualitative factors such as employee morale, quality of
management, market conditions.

10. Cont’d
Window dressing/creative accounting:
Companies may involve in creative accounting and manipulate the data which can affect
the transparency.
Ignoring Inflation:
Traditional financial statements may not fully account for the impact of inflation on the
value of money over time, particularly in periods of high inflation.
Complexity for Non-Experts:
Interpreting financial statements requires a certain level of financial education. Non-
experts can find it challenging to understand the complex accounting principles and
financial jargon.

11. Thank You!