Question

Discuss in general why improving disclosure practices and accuracy of financial statements is such an important governance mechanism.

Answer 1

1. Financial statements are the base on which many stakeholders depend to arrive at a conclusion about the dependability of a company.
2. Proper disclosure and accuracy is such important because many people enter into transactions with the company based on the financial statements such as
   1. Banks providing loan to the company,
   2. Government granting benefits,
   3. Common people investing in the company etc;
3. Improving disclosure is also a major thing because common people should also be able to estimate about the company who doesn't even have any accounting knowledge, so financial statements should be very clear and legible.
4. Especially those transactions which affect the continuity of the company should be disclosed properly.
5. Standards are established to monitor whether companies are disclosing all these correctly.