Accounting Profession

Explain the benefits that the accounting profession gained after adopting a full disclosure principle-The full disclosure principle states that all relevant and necessary information for the understanding of the company’s financial statements must be included in public company filings. This principle is crucial to ensuring that there is no lack of information between the company’s management, current shareholders, debtors, or other third parties vested. The principle helps foster transparency in financial markets and limits the opportunities for potentially fraudulent activities.

 

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Discuss some of the reasons why disclosure requirements are increasing-The perceived benefit from this or any accounting standard is increasing, ideally to improve the resource allocation process to quantify its benefit. Even in the absence of international misuse, reliance on professional judgment might result in different interpretations for similar transactions, raising concerns about comparability. Also, detailed rules help auditors withstand pressure from clients who want a more favorable accounting treatment and help companies ensure that they are complying with GAAP and avoid litigation or SEC inquiry.

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