Summary of the Elements of Financial Management
There are numerous elements of financial management and for financial management to be successful, it is important that each of the elements are taken care of and considered carefully. Financial Reporting, Accounting Records and Source Documentation, Budget Control, and Cash Management are four of the most important elements of an effective financial management system . Some literatures may use different terms only to suggest the same thing.
There are also other aspects or elements of financial management such as allowable cost calculations, compliance, and internal control of financial assets, among others. It may be practical for someone who is trying to control the inflow and outflow of cash in a particular organization to study the individual impacts of these additional elements on the company’s financial management strategies and outcomes but in general, the financial management team’s attention should focus on the four main elements mentioned. Financial reporting is perhaps one of the most important, if not the most important aspect of financial management, especially for publicly listed companies or those that make use of capital obtained from investors (both institutional and private) to expand their business.
This is because there are companies that have been caught falsifying, either intentionally or unintentionally, some details about their financial report and statement. Most of the time, the companies that have been caught doing it have done so intentionally. It is important to know that this is against the standard norms and ethics of financial reporting. In fact, even common sense would suggest that falsifying any form of information in such a delicate document (which can also be used by the court for whatever purposes it may serve) can be considered unethical and even illegal.
More and more workarounds are being developed by con companies and fortunately at the same time, there are companies and organizations that work hard to uphold the integrity of the accounting community. In a journal article published in the Journal of Economics, Finance, and Administrative Science, the author discussed the perceptions of professionals in the field of accounting and auditing about their acceptance and adaptation of global financial reporting standards and concluded that following global financial reporting standards is indeed one of the best ways to discourage companies from committing any auditing and financial reporting crimes .
Summary of Generally Accepted Accounting Principles
The Generally Accepted Accounting Principles or what is also known as the GAAP is a set of accounting principles, procedures, and standards that organizations and businesses use and follow when it comes to the process of compiling any financial related information they may publish in their financial statements. The same can, in fact, be said for the General Financial Ethical Standards.
These two are basically just a collection of standards and principles; the former focuses on procedures while the latter focuses on the ethics-part of drafting financial statements and executing financial and accounting practices and processes. Although they are termed as generally accepted, there are still plenty of rooms within them that cons or fraudulent accountants and auditors can exploit .
Examples of Financial Reporting Practices and their Significance
One example of financial reporting-relevant issue is the harmonization of the generally-accepted and ethical accounting and auditing practices in all countries. This example can be as the world becomes more globalized, the impact of one fraudulent accounting activity, can have bigger impacts on other companies and if the extent of the activity is so large, it can even affect an entire country’s financial system.
So, as the international economy becomes globalized, it is important to have a globalized set of accounting and auditing practices that legit and law-adhering organizations can follow. Another example of an issue discussed in Bozkurt et al.’s paper was the way how unscrupulous auditors and accountants make use of the holes in most GAAPs to still further their agenda and execute their fraudulent practices. This is, in fact, one of the biggest problems that legit companies face—even with the presence of things such as GAAP because if the GAAP cannot stop these unscrupulous auditors and accountants, then that means some stronger solutions need to be developed.
Works Cited
Bozkurt, O., M. Islamoglu and Y. Oz. "Perceptions of Professionals Interested in Accounting and Auditing about Acceptance and Adaptation of Global Financial Reporting Standards." Journal of Economics, Finanace, and Administrative Science (2012): 16-23.
DHFS. "Basic Elements of an Effective Financial Management System." DHFS (n.d.): 01.
Rezaee, Z., L. Smith and J. Szendi. "Convergence in Accounting Standards: Insights from Academicians and Practitioners." Advances in Accounting (2010): 142-154.
