CONCLUSION
If the horror stories recounted in this chapter were isolated incidents, it might be valid to argue that in most cases, the combined impact of corporate disclosure requirements and external audits ensures a high level of reliability in financial statements.
Intense analysis of the statements by the users would then seem superfluous. Many companies, however, are either stingy with information or slippery about the way they present it. Rather than laying down the law (or GAAP), the auditors typically wind up negotiating with management to arrive at a point where they can convince themselves that the bare minimum requirements of good practice have been satisfied. Taking a harder line may not produce fuller disclosure for investors, but merely mean sacrificing the auditing contract to another firm with a more accommodating policy. Given the observed gap between theory and practice in financial reporting, users of financial statements must provide themselves an additional layer of protection through tough scrutiny of the numbers.
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Source:
Fridson M., Alvarez F.. Financial Statement Analysis. John Wiley & Sons, Inc.,2002. — 413 p. 2002
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