Problems of Implementing the Trueblood Objectives Report

Abstract

Financial statements are not just statements reporting on the financial activities and financial status of a corporation. They are a product of mutual interactions of three parties: corporations, users of financial statements, and the accounting profession. Corporations are not only the subjects whose status and activities are reported in financial statements; they are also the sole suppliers of financial statements. Without actions by corporations there is no way for an outsider to prepare financial statements with a satisfactory degree of reliability. This feature of self-assessment-namely, a corporation's assessing and reporting its own financial status and performance-has a significant implication to the institutional structure that surrounds financial statements, as we shall elaborate on later. By users-the second party that is intimately related to financial statements-we mean not only past, present, and future shareholders and creditors but also financial analysts, governmental agencies, and the public in general. The third party is the accounting profession (or simply the profession), by which we mean not only individual accountants and auditors but also the system that influences the activities of accountants and auditors. The role of the profession is to improve the reliability of the contents of financial statements. The interests of these three parties interact as shown in Diagram 1. In the diagram, Circle C represents a set of information that the corporation agrees to report in financial statements (voluntarily or because of requirements). Circle U represents a set of information that the users want