Reference no: EM131796733

Statement One

Accounting provides financial information to the management, shareholders, and stakeholders of a company. It is a tool that guides decision making and provides alternative approaches to a dilemma faced by managers. Its reports financial proceeding to the shareholders and potential investors. It is a partial fact that the primary role of accounting is to communicate to managers on the financial position of the organization, accounting primarily communicate to the shareholders on the state of their investments and the immediate financial situation of the company. Financial reports are not the only tools used to decisions; companies conduct other instruments such as SWOT analysis.

Statement two

Financial report prepared in agreement with the GAAP should be conservative. GAAP details the standards that govern accounting practices (Gordon, 2008). It standardizes accounting policies and principles using guidelines rather that a principle-based framework. Accountants and Auditors should be guided by their practices, and different accountants should end at a similar conclusion if they perform the same task. A conservative approach to accounting ensures that financial reports are not doctored and falsified and that they can be interpreted correctly by another account. It is untrue that all accountants approach accounting challenges using a similar technique, depending on their training and experience, different accountants reach the same conclusion using different approaches. It is a fallacy that GAAP policies lead to poor accounting practices and prevents accountants from seeking alternatives to accounting dilemmas. Those against the principles argue that Accounting experts lose their credibility if they make minor adjustments and diverge from the accounting principles (MacDonald, 2002.Many base accounting errors on accounting judgment and view them as an intentional technique that seek to falsify reports.

1) You make a statement that a conservative approach will ensure that financial statements are not "doctored." Do you think this is a true statement? By making conservative estimates doesn't that mean that the financial statement could be inaccurate, and therefore considered "doctored."