Financial Statements are very important and useful tools when it comes to measuring the overall performance of the company across a given time frame.
There are numerous stakeholders which make use of the financial statements, essentially because of the fact that they provide a snapshot regarding the company’s performance in shorter time duration.
As a matter of fact, it, therefore, becomes increasingly important to make sure that these financial statements are prepared properly, and are able to depict the actual position of the business, without any cover-up.
Therefore, there are certain responsibilities that management should take into consideration, primarily as their responsibility towards ensuring that they are able to comply with the relevant rules and regulations, and do not misrepresent any information.
Key responsibilities over Financial Statements:
This involves preparing the financial statements in accordance with the rules and regulations set out by the governing accounting body.
This requires the management to present the Financial Statements with complete knowledge and understanding regarding the procedure to be followed.
The management undertakes responsibility regarding no material misstatements being present in the financial statements that have been prepared.
Given the fact that the financial statements are primarily prepared by the organization, yet management should ensure that they are able to account for a couple of important aspects.
Firstly, it is important to ensure that the financial statements are prepared in compliance with the rules and regulations, as presented by IFRS (International Financial Reporting Standards), or GAAP (Generally Accepted Accounting Principles).
This compliance is really important, for purposes of standardization and consistency across different platforms.
In addition to preparation pertaining to the given rules and regulations, the management is also responsible for the overall integrity and objectivity of these financial statements.
All the estimates which are necessary for the general discourse of preparation should be carried out based on careful judgements.
Furthermore, management is also supposed to provide the rationale for systems of internal control, which is designed to provide reasonable assurance on numerous matters of importance.
Basically, the management is responsible for providing assurance on issues including the overall controls to prevent substantial losses to assets and ensuring that that all the methods of estimations are correct.
Furthermore, the management is also responsible to commit that they cooperate with the audit teams (both internal and external) so that they are able to pass their proper judgement, without any hindrance from the management.
Therefore, management is also expected to fully cooperate with them, and try to facilitate them in every way possible.
As far as responsibilities of management are concerned, it can also be established that the board of directors is responsible for ensuring that the management fulfils its commitment and responsibilities regarding financial reporting and internal control.
Therefore, this chain of command ensures that the management is able to perform in accordance with the set standards, and they are able to deliver on the parameters mentioned above.
The responsibility of the management is a very integral function in the overall organization, because it invokes a sense of trust and understanding, not only between the auditor and the management but also between the management and the shareholders.
This is because there is clarity regarding the management’s efforts in ensuring that there are no questionable aspects, which might raise concerns from any external stakeholder.