Question

1. Write various provisions of IFRS related to ethical considerations in financial reporting in Saudi Arabia.
2. Also, write various violations in financial reporting that are described by IFRS.
3. What are the various possible measures to stop those violations as per IFRS?

Answer 1

Financial reporting-

Financial reporting refers to the communication of financial information, like financial statements, to the financial statement users, like investors and creditors. Financial reporting is typically viewed as companies issuing financial statements. A general purpose set of financial statements include a balance sheet, income statement, statement of owner’s equity, and statement of cash flows, but financial reporting is much more broad than just as set of financial statements.

The following points highlights why financial reporting framework is important –

*In helps and organization to comply with various statues and regulatory requirements. The organizations are required to file financial statements to ROC, Government Agencies. In case of listed companies, quarterly as well as annual results are required to be filed to stock exchanges and published.

*Financial Reports forms backbone for financial planning, analysis, bench marking and decision making. These are used for above purposes by various stakeholders.

*Financial reporting helps organizations to raise capital both domestic as well as overseas.

*On the basis of financials, the public in large can analyze the performance of the organization as well as of its management.

*For the purpose of bidding, labor contract, government supplies etc., organizations are required to furnish their financial reports & statements.

The following points sum up the objectives & purposes of financial reporting –

*Providing information to investors, promoters, debt provider and creditors which is used to enable them to male rational and prudent decisions regarding investment, credit etc.

*Providing information to shareholders & public at large in case of listed companies about various aspects of an organization.

*Providing information about the economic resources of an organization, claims to those resources (liabilities & owner’s equity) and how these resources and claims have undergone change over a period of time.

*Providing information as to how an organization is procuring & using various resources.

*Providing information to various stakeholders regarding performance management of an organization as to how diligently & ethically they are discharging their fiduciary duties & responsibilities.

*Providing information to the statutory auditors which in turn facilitates audit.

*Enhancing social welfare by looking into the interest of employees, trade union & Government.