The Economic Impact of the Lack of Transparency in Financial Reporting |
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Authors: | Gerald H. Lander Kathleen A. Auger |
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Affiliation: | (1) Gregory, Sharer & Stuart Term Professor in Forensic Accounting, College of Business, University of South Florida St. Petersburg, St. Petersburg, FL 33701, USA;(2) Perzel & Lara Forensic CPAs, P.A., 2105 Drew Street, Suite 200, Clearwater, FL 33765, USA |
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Abstract: | Off-balance-sheet amounts are in the trillions of dollars, not including all transactions with off-balance-sheet implications. Financial managers and consultants intentionally structure transactions that are abusive of off-balance sheet accounting rules, which leads to a lack of transparency in financial reporting. This paper explores several ways in which companies manipulate off-balance sheet transactions to satisfy personal and business objectives as well as the impact of such manipulations. It is time for regulatory bodies to close the loopholes, eliminate overly rules-based standards, clearly state the economic objective of each standard, and require firms to disclose the economic motivations for the accounting practices they adopt. |
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Keywords: | Financial transparency Corporate governance Economic reality Ethical awareness |
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