As per full disclosure
principle, accountant should disclose all the information in his made financial
statement. No accounting information will be concealed because it may be risky
for interested parties of accounting information.
Company should give clear detail of current loan taken; it will be helpful for creditors. In the balance sheet, all assets and liabilities are shown what are existing in the business at their correct book value; it will be helpful for investors to assess the financial position of business. As per this principle, businessman, management and accountant should not use window dressing and accounting loopholes for misleading users through wrong financial statements.
It is also duty of Auditor to check whether financial statements have been fully disclosed or not. For this,
b) If there is case against company for paying any contingent liabilities, accountant should disclose it in the footnote of balance sheet.
c) Accountant should also adopt the consistency concept. He should use same inventory valuation method, depreciation method and other method. If he changes in any method, he should disclose it in the footnote of financial statement.
d) If company has invested his money in share market, mutual funds, Gold and real estate and other products whose each day’s are disclosed by different newspaper. On this basis, accountant must disclose the current market value of their investment in the footnote. For example, today price of Gold (10 gram) is Rs. 29000 but two months ago, it was Rs. 34000 per 10 gram. It means, if any company who invested Rs. 50,00,000, two months ago in the gold, now, its value is just Rs. 42,64,705. From this, fact, investors gets useful information that value of asset of company has decreased with Rs. 7,35,294. It means, its share capital will decrease with same amount. So, if there is the chance of more decreasing in the value of Gold, investor can take the important decisions to sell the shares of same company. But, it can only possible if company will disclose all information very clearly and honestly.
e) If management think, due to changes in the politics, income tax rates will change and its effect will on the financial statement, all these effect on profitability should be disclosed very clearly in the footnotes.
f) If company is working in foreign country or countries he should disclose the effect of changes in Forex rate on the financial statements.
g) If there is big effect of inflation on each items, company can make additional financial statements in which all inventories, assets and other financial information will be shown on the basis price level changes level.
Comments