the role of financial statement in decision making
INSTITUTE OF ACCOUNTANCY ARUSHA
RESEARCH REPORT
ON
THE ROLE OF FINANCIAL REPORTS IN DECISION MAKING
A CASE STUDY OF; THE MINISTRY OF INFRASTRUCTURES DEVELOPMENT
BY: MANS’S SON
ADA III 2006/2007
SUPERVISOR:
MR G. PETERSON
A RESEARCH REPORT TO BE SUBMITTED TO THE INSTITUTE OF ACCOUNTANCY ARUSHA AS A PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE AWARD OF ADVANCED DIPLOMA IN ACCOUNTANCY (ADA)
CHAPTER ONE
1.1 INTRODUCTION AND BACKGROUND OF THE PROBLEM The primary responsibility of the management is to make decision by using adequate accounting data obtained from proper financial reports. The globalization of business and the capital markets is pushing the world from behind, demanding better accounting systems and frameworks so as to come up with financial reports which are timely, relevant, accurate, comparable and understandable so as to facilitate decision making processes.
Nevertheless many companies and organizations all over the world are experiencing difficulties in decision making processes resulting from inappropriate accounting records/ reports. Nobes C, et al (2002). postulated that to some extent financial reports may be prepared in such a way that may not meet the needs of the users This problem is explained worldwide; external environment culture, legal system, taxation and inflation may influence it.
Cole (2000) postulated that in most continental Europe, Asia and Africa, the traditional scarcity of ‘outsiders’ shareholders has meant that external financial reporting has been largely invented for the purpose of protecting creditors or controllers of economy. This has not encouraged the development of flexibility, judgment, fairness or experimentation. However, it does not lead to more careful accounting. This is because creditors are interested in whether, in worst case; they are likely to get their money back, whereas shareholders may be interested in an unbiased estimate of future prospects. Practically it
RESEARCH REPORT
ON
THE ROLE OF FINANCIAL REPORTS IN DECISION MAKING
A CASE STUDY OF; THE MINISTRY OF INFRASTRUCTURES DEVELOPMENT
BY: MANS’S SON
ADA III 2006/2007
SUPERVISOR:
MR G. PETERSON
A RESEARCH REPORT TO BE SUBMITTED TO THE INSTITUTE OF ACCOUNTANCY ARUSHA AS A PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE AWARD OF ADVANCED DIPLOMA IN ACCOUNTANCY (ADA)
CHAPTER ONE
1.1 INTRODUCTION AND BACKGROUND OF THE PROBLEM The primary responsibility of the management is to make decision by using adequate accounting data obtained from proper financial reports. The globalization of business and the capital markets is pushing the world from behind, demanding better accounting systems and frameworks so as to come up with financial reports which are timely, relevant, accurate, comparable and understandable so as to facilitate decision making processes.
Nevertheless many companies and organizations all over the world are experiencing difficulties in decision making processes resulting from inappropriate accounting records/ reports. Nobes C, et al (2002). postulated that to some extent financial reports may be prepared in such a way that may not meet the needs of the users This problem is explained worldwide; external environment culture, legal system, taxation and inflation may influence it.
Cole (2000) postulated that in most continental Europe, Asia and Africa, the traditional scarcity of ‘outsiders’ shareholders has meant that external financial reporting has been largely invented for the purpose of protecting creditors or controllers of economy. This has not encouraged the development of flexibility, judgment, fairness or experimentation. However, it does not lead to more careful accounting. This is because creditors are interested in whether, in worst case; they are likely to get their money back, whereas shareholders may be interested in an unbiased estimate of future prospects. Practically it
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