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Why Public Companies Need to Follow Gaap

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Submitted By mikki
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Explain why public companies need to follow GAAP when they prepare their financial statements.
Companies need to follow GAAP so that financial statements are standardized, making it possible for shareholders to compare companies to one another. It also helps keep the information easier to understand, more accurate, and promotes transparency.
Explain why financial statements of public companies need to be audited before they are shared with the public.
Audits ensure that the numbers are not being manipulated to make a company appear more financially healthy than it really is. Shareholders have only the financial reports to go by, so an audit protects the shareholder by verifying reported data.

Explain how auditors conduct the audit and how they communicate their findings.
Generally, a report from an auditor will have three sections. The first section tells the duties of the directors and auditors. The second is the coverage of the audit, and verifies that GAAP were utilized. The last section gives the opinion of the auditor (Auditors).

What is the information that is included in package 10K?
The SEC requires companies to provide a yearly financial report that gives a complete overview of the company’s financial state. The report must be filed within 90 days of the end of the company’s fiscal year. It includes statements on equity, assets, liability, income, and cash flow generated throughout the fiscal year. It also contains information on executive compensation and the company’s organizational structure (10K).

Explain what is included in 10Q reports and why they are needed.
10Q forms are quarterly reports that have to be filed by publicly traded companies and some private companies. The reports contain information on the company’s equity. Companies only file three 10Q reports a year because the fourth quarter is reported in the annual report (10K)...

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