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Financial reporting is arguably one of the most heavily regulated areas of business activity. Provide the...

Financial reporting is arguably one of the most heavily regulated areas of business activity. Provide the main reasons why accounting information is so heavily regulated. In your answer try to address the intended consequences of such regulation

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Answer #1

Reasons why Accounting Information is so heavily regulated business activity are:

  • Accounting Information is the one which is highly used by the stakeholders of an organisation
  • It is used by management for decision making for the future of the organisation
  • It is the info which is used by the stakeholders for stock trading decisions
  • It is used by the banks for determining credibility
  • It is used by Govt. for sanctioning grants
  • As the users are heavily dependent on the accounting info, it has to be subject to regulation by the regulators
  • If it is not regulated, then the decisions by management go wrong, govt may give grants to ineligible organisations, traders of the stock may be defrauded & Banks may incur losses.
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