Financial Information On The Corporate And Stock Holders ( Pride, Hughes And Kapoor

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Financial statements such as income statements, cash flow statements, and balance sheets are reports which companies use to report financial information to the public and stock holders (Pride, Hughes and Kapoor, 2015). These financial documents enable the public and prospective investors informative on the financial viability of the company. Additionally, these statements assist potential investors in knowing how the senior executives are managing the company’s resources. Unfortunately for JCPenney the 2013 annual report financials reflected poor performance which may have “scared off” potential investors.

Are there any risks associated with the compilation and analysis of information, for example, accuracy or relevance?

There may be an inherent risk regarding the compilations and analysis of the financial’ accuracy and/or relevance. This risk is related to the fact that the senior executives’ compensation is directly tied to JCPenny’s performance metrics. As such, these executives could possibly be invested in changing financial information and/or letting the public think the financials may be better than they in fact are.

How can such risks be minimized?

These risks may be minimized by ensuring the public accounting firm (outside auditors) have no connection to JCPenney executive management. By ensuring this there would be conflict of interest and thus no incentive to change financial documents.

2. Review Item 7. Management’s Discussion and Analysis of Financial…

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