What’s the purpose of financial statements?


Financial reporting is one of the key segments in successful company management. By compiling a financial report, companies provide all the required information about their operations and business results for a certain period (most often a calendar year), that is, they provide a true and objective overview of the financial position and success of the business.

Financial reporting is intended for different persons, including capital owners, investors, creditors, regulators and other interested parties and is a process of collecting, analyzing and presenting data on the financial operations of a particular company. Therefore, the primary task of financial reporting is to create high-quality financial reports that boost the trust of investors, creditors and other stakeholders, thereby creating a favourable environment for investments and economic activity in general.

Apart from adhering to professional and legal regulations, compiling top-quality financial reports implies compliance with ethical norms, that is, the ethical behaviour of people who put together financial statements. The harmonization of accounting and auditing practices is especially important, which facilitates accounting and financial communication between business entities worldwide.

The business community, as well as the knowledgeable public, remember cases in which financial reporting was one of the main causes of the collapse of some of the largest companies in the world. For example, Enron Corporation was a Houston energy giant that went bankrupt in 2001 after numerous illegal activities were discovered. The corporation, among other things, presented false financial reports that hid losses of millions of dollars while maintaining a high share price. Another well-known case also happened in the United States of America, when the telecommunications giant WorldCom went bankrupt in 2002 after fraudulent financial reporting of over 3.8 billion dollars was discovered. They hid losses through “creative accounting” to maintain the image of a powerful and strong company. Then there is Tyco International, which was engaged in the production and distribution of various products – from security systems to medical equipment. The company also went bankrupt in 2002, with over $5 billion of fraudulent financial reporting uncovered.

There are many similar situations in which, even when there is no bad intention, a crucial error can occur, which later results in business failure. However, nowadays, there is an appropriate solution. A good and professional business partner, with enviable experience and a guarantee of prosperity, is always welcome, and every client of the FinExpertiza auditing company will get exactly that from our FinExperts. The professional team in this renowned and globally recognized audit firm will ensure that the client’s attention remains on the expansion and improvement of business, while financial reporting or confirmation of the truthfulness and objectivity of the data presented in the financial reports will be FinExpertiza’s obligation and pleasure.

Financial reporting is one of the key segments in successful company management.