Question

What is Reliability, Understandability, and Verifiability? Is this good for a university?

Answer 1

Reliability refers to the trustworthiness of financial statements. It basically refers to the concept of recording only those financial transactions in the books of accounts which can be verified by the objective evidence such as purchase receipts, promissory notes. Significant omissions or errors reduce the reliability of the data presented.

Understandability means that the accounting information should be presented in such a manner that it can be easily comprehended by its users who have reasonable knowledge of business. In order for financial statements to be understandable, they must be complete, concise, clear and organised. Understandability of financial statements is very important for it to be reliable.

Verifiability means that the financial information presented by the company should be verifiable by a third party. This means that an outside auditor should be able to reproduce the same financial statements as generated by the company using the same sets of data and assumptions. It not only means duplicating the financial statements but also assessing whether the firm took right assumptions Verifiability is an important concept as it helps to ensure that the information present is true and sound.

It is very important for any organisation whether a university or a firm to present its information in a reliable, understandable and verifiable manner. These concepts will help university administration to gain trust of the the various stakeholders such as government, student union etc.