Financial statements are meant to enable the reader to evaluate the performance of an enterprise, analyze its cash flows and assess its financial position. Recently, widely publicized cases of misleading statements, which were nevertheless attested as to their fairness by outside auditors, resulted in improper revenue recognition, overstatement of income and misrepresentation of financial position. There is now a growing awareness of the importance of honest reporting as the foundation for investors’ confidence in the integrity and proper functioning of the financial markets.
This course examines the generally accepted accounting principles [GAAP] underlying the financial statements, their implementation in practice and the role of the independent auditors. Note is also made of the limitations of financial reports, their evolution in response to changing business conditions, current accounting controversies and the constraints that limit the freedom and influence the course of action of rule makers and regulators. The perspective and main focus are not those of the accountants who prepare financial reports, but rather those of the users of the information contained in them: mostly investors and the financial analysts who serve them, creditors and, to some extent, management.
Urooj Khan is an assistant professor in the Graduate School of Business, Columbia University. He is also the Assistant Director of Program of Financial Studies’ initiative on the future of banking and insurance and a faculty advisor to the India Business Initiative. Between 2014 and 2015, he was a part-time researcher with the U.S. Department of the Treasury’s Office of Financial Research...