Analysis of Article Titled SEC Nudges Companies on Cash Flows
Summary of the Article
The article under review is SEC Nudges Companies on Cash Flows which is written by Mr. Tammy Whitehouse on December 23rd, 2014. Before finalizing the cash flow statement, staff members should determine if the financial data is accurate and free from material misstatements. They should examine the viability of manual and automated processes/controls in this regard. Furthermore, the auditors should also investigate if all financial transactions are considered in the preparation of cash flow statement.
Since people have different opinions about interpretation of cash flow statement, the classification of the account in headers of cash flow from operating, investing and financing activities is left open to the management. The Financial Accounting Standards Board (FASB) is concerned about the classification and reporting of different accounts to reduce diversity/differences in financial reporting .
The article is related to accounting because it demonstrates tighter monitoring controls and procedures for the preparation of cash flows statement and its restatement in case errors are identified.
Learning from the Article
Compared to other financial statements, it is learnt from this article that managers tend to make more mistakes in finalizing and reporting cash flow statement. It is also learnt that this mistake consumes more time in redoing and reinvestigating the whole reporting process. However, sampling of large accounts for examination is a feasible idea to identify any large financial error. Therefore, it is important that risk assessment and proper controls to monitor the viability of internal processes should be in place.
Opinion
The given article is quite interesting as well as mind blowing in nature since it was the first time to learn that accountants make their mistakes in the preparation and reporting of cash flow statement. This article is also interesting to highlight major concerns of Global Accounting Authorities (such as FASB) to examine internal control and performance of a risk assessment to keep the cash flow statement free from restatement risk.
Works Cited
Whitehouse, Tammy. SEC Nudges Companies on Cash Flows. 23 December 2014. 09 February 2016 <https://www.complianceweek.com/news/news-article/sec-nudges-companies-on-cash-flows>.
