Financial statement users, therefore, adopt ratio analysis to counter this burden of information overload and get an accurate picture of the firm performance. Analysis of the financial statements of a company reveals important information to its stakeholders thereby leading them to make inferences about its financial condition and attractiveness as an investment. With its 60 year history, MCB has depicted a tremendous growth record and is listed on all stock exchanges in Pakistan with a significant market capitalization Muslim Commercial Bank Annual Report, Liquidity ratio measure whether a company has sufficient cash to meet its obligations as they fall due.
Leverage ratio detects the impact of using creditor funds whereas operating ratio assesses whether the resources are effectively employed. Solvency attempts to detect financial tolerance of the company to ensure the company is not headed towards financial distress. The results of the application of ratio analysis to MCB financial statements are shown in the appendix in table 1.
The liquidity ratio of the company has improved as compared to the previous year, suring from 1. This is due to the improved cash flow generated in the year The other ratios also depict an uptrend signaling stability and consistency in growth. The information excerpted from the annual report is an evidence of the vital signs of the company to its stakeholders. The main stakeholders that closely monitor the business performance of an organization are the creditors, investors, and managers.
Creditors particularly pay close attention to the short-term liquidity and long-term solvency of the company Emery This implies that they are the eyes and ears of their shareholders and are required to act in the best interest of their shareholders. To ensure that they carry this crucial role without putting their interests ahead, audits are carried out to examine and verify transactions that a corporation undertakes.
This is because shareholders have little or limited access to the operations and information of their companies. Audits can, therefore, be argued to be valuable additional mechanisms that enhance transparency in corporations. Traditionally, auditing was developed to respond to accountability.
In the past few decades, there have been numerous financial scandals involving reputable companies in devloped economies. Nevertheless, these corporations, year after year, have been presenting their audited financial reports to the public.
Thus, raising doubts on the accuracy of financial information and its reliability in aiding stakeholders take investment decision. Ironically, audit is supposed to prevent investors from getting into such enormous loses.
Corporations are legally mandated to provide their investors with audited financial statements Gray and Stuart, , pp This is in order to aid investors and other stakeholders make informed decisions. Financial scandals involving high value enterprises, however, have shaken this trust and the confidence of financial reporting.
The roles of audits have often been questioned, and doubts on audit reliability arise whenever there is financial crisis involving reputable companies audited by equally reputable auditors. Acceptable auditing standards dictate that there should be relevance in the information being provided. In addition, such information should be neutral, have, compatibility, timeliness, verifiability, reliability and transparency. When these standards are met, the likelihood of releasing inaccurate information is significantly reduced.
The role of auditors include performing risk procedure assessments; they are able to do this through understanding the internal controls of an organization. If the role of audits, in this case, is enhanced, they would have to examine the methods applied in reaching the best alternative. Therefore, this would mean duplicating the roles that are performed by management Gray and Stuart, , pp This also implies taking more time verifying the internal controls.
Such process would mean taking more time and wasting resources. Enhancing the roles of audits would, therefore, mean second guessing all the management decisions and choices and would beat the purpose of performing the audit.
Audits also evaluate and assess the risks that are likely to occur when the management is preparing financial statements. Deadline Select 8 hours 12 hours 24 hours 48 hours 3 days 4 days 5 days 7 days 10 days 20 days. Fill in the Order Form. Writer Begins working on the paper. Download complete paper via email or account. I had a difficult SPSS assignment and a really busy weekend. I could not manage to complete my assignment in time so I ordered a paper here.
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