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Unformatted text preview: 6 ADDITIONAL ASPECTS OF FINANCIAL REPORTING AND FINANCIAL ANALYSIS CHAPTER OBJECTIVES After careful study of this chapter, students will be able to: 1. Describe an auditor's report. 2. Understand the meaning of an operating segment. 3. Describe the disclosures in a segment report. 4. Explain interim reporting. 5. Prepare an interim report. 6. Understand intracompany and intercompany comparisons (Appendix). 7. Prepare horizontal and vertical percentage analyses (Appendix). 8. Perform ratio analysis (Appendix). 6-1 SYNOPSIS Financial Statements and Market Efficiency 1. General purpose financial statements designed to meet the needs of external users are published in a company's annual report , which also includes accompanying notes, an auditor's report, the management report, and management's discussion and analysis. In addition, companies prepare interim reports for accounting periods of less than a year. 2. The efficient markets hypothesis presumes that the prices of securities traded in the capital markets fully reflect all publicly available information, and that these prices adjust to new information almost immediately in an unbiased manner. Full disclosure of financial information helps to prevent unscrupulous use of insider information and aids in the efficient operation of capital markets. Auditor's Report (Opinion), Audit Committee, and Management's Report 3. Most published financial statements are audited by an independent certified public accountant. In an audit of a public company, the certified public accountant conducts an examination of the companys internal control over its financial reporting, as well as its accounting system, records, and financial statements in accordance with generally accepted auditing standards. The Public Company Accounting Oversight Board sets these auditing standards. Based on this examination, the auditor issues an audit report which expresses three opinions: (1) that managements assessment that the company maintained internal control over its financial reporting is fairly stated, (2) that the company maintained effective internal control over its financial reporting, and (3) that the companys financial statements present fairly the financial position of the company and the results of its operations and cash flows in conformity with accounting principles generally accepted in the United States of America. An unqualified opinion states that the internal control was maintained and the financial statements present the information fairly in accordance with generally accepted accounting principles (GAAP), in all material...
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This note was uploaded on 06/11/2008 for the course ACCT 3023 taught by Professor Fasci during the Spring '08 term at Texas San Antonio.
- Spring '08