ASSIGNMENT

Name: Waleed Naveed

Section:

Teacher: Prof. Tariq Zia

Subject : Auditing Principles And Practices

Program: BS-A&F-1
Q: You are CEO of business (manufacturing/services/
You believe in sound and robust financial reporting
framework as you consider stakeholders being
interested and effected by information you produced in
annual reports.
Required:

List any ten of your stakeholders and mention the type

of financial information they require from you along
with the reason to be interested in that particular data

Ans: The financial statements of an entity are not only prepared for

internal users but also for external stakeholders. It is important to
understand the needs of these stakeholders so that the financial
statements can be prepared in accordance with those needs. Let us
understand the crucial external users that matter.

1. Owners
Having invested their earnings in the firm, the main interest of owners
in financial statements is to assess the returns on their investment and
how prosperous do they appear for the future. Owners generally have
access to all financial records and files.

2. Management
The management team of a business needs to understand
the profitability, liquidity, and cash flows of the organization each
month, so that it can make operational and financing decisions about
the business. Management will also have access to all records.
 3. Competitors
Firms which are in competition against a business will attempt to gain
access to the rival’s financial statements, in order to evaluate their
financial position. This could be used to craft necessary competitive
strategies.

4. Customers of the business

When a customer is considering which supplier to select for a
major contract, it wants to review their financial statements first, in
order to judge the financial ability of a supplier to remain in business
long enough to provide the goods or services mandated in the contract.

5. Employees
A company may elect to provide its financial statements to employees,
along with a detailed explanation of what the documents contain. This
helps increase the level of employee involvement in and understanding
of the business.

6. Government
A government in whose authority a company is located would request
the financial statements in order to determine whether the business is
paying the right amount of taxes and relevant laws are being adhered
to.

7. Analysts
Outside analysts want to see financial statements in order to decide
whether they should recommend the company’s securities to their
clients. Auditors will also need to analyze financial records.
 8. Creditors
An entity loaning money to an organization will require financial
statements in order to estimate the ability of the borrower to pay back
all loaned funds and related interest charges.

9. Suppliers
Suppliers will require financial statements in order to decide whether it
is safe to extend credit to a company.

10. Trade unions

A union requires the financial statements of a business in order to
evaluate the ability of a business to pay the due compensation to the
union members that it represents. There may even be other users of
financial statements than the above mentioned. There are many
advantages of studying the financial statement for these parties. They
can rely upon the information contained in such financial statements
and to act upon that information as desired.