ISSUES IN FINANCIAL REPORTING Essay Example | Topics and Well Written Essays - 2500 words

ISSUES IN FINANCIAL REPORTING - Essay Example The analysis of the enterprise’s performance is critical because it helps decision makers such as the investors and managers for effective decision-making. The analysis of performance provides information about the efficiency of allocation of resources and factors causing the business not to achieve its objectives (Hargreaves 2015) The trend analysis will enable the stakeholders in making an assessment as to whether the company is improving or not improving and how competitive the company is in the industry (Alexander, Britton & Jorissen, 2011). The report provides causes for observed performance in the particular company. The report offers a recommendation on the areas that require improvement to achieve better financial performance. Corporate governance refers to a method of directing and controlling companies. It involves balancing between social and individual goals or economic and social goals to align the interests of the businesses, individuals and the society as close as is practicable (European Accounting Review, 2015). It specifies the correlation between shareholders, the board of the company and other stakeholders. Also, it provides the structure for setting up company’s objectives, approaches for attaining these goals and determines how to monitor the performance (Alexander et al., 2011). Corporate governance eases operational, innovative and sensible management that can promote continuous performance of the business. Corporate governance is reinforced by various theories such as agency theory, stakeholders’ theory, resource dependency theory and stewardship theory. The responsibility of governing corporations is bestowed upon the board of directors. Shareholders have the responsibility of appointing the board of directors to ensure to ensure effective corporate governance (European Accounting Review, 2015) On the other hand, the board of directors sets the