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Full Disclosure Principles

700 Words3 Pages

Full Disclosure A full disclosure principle was implemented by the Securities and Exchange Commission (SEC), to ensure that companies provide users with information essential to understanding their business. The full disclosure principle in accounting “dictates in deciding what information to report” (Kieso, Weygandt, & Warfield, 2013). The information provided helps influence the judgements and decisions of investors, creditors, and third-party partners, on whether or not they want to investing resources into their company. The full disclosure principle ensures that all firms follow the general rules of accounting set forth by the SEC. Increase in Disclosure Requirements Over the last ten years, the disclosure requirements have increased …show more content…

The requirement in order to make it the reports less complex, is to use “notes to financial statement”, which help explain the complex transactions (Kieso, Weygandt, & Warfield, 2013). The users of the financial reporting such as investors and creditors, have demanded that the information provided be current and predictive. With this demand, the SEC has required businesses to create a financial forecast (Kieso, Weygandt, & Warfield, 2013). Lastly, the SEC has appointed accountants and auditors to control and monitor the concerns of financial reporting such as management compensation, off-balance- sheet, financing arrangements, and related-party transactions (Kieso, Weygandt, & Warfield, …show more content…

According to Kieso, Weygandt, and Warfield (2013), there are three different types of disclosure issues that occur, errors, fraud, and other illegal acts. Errors occur quite often, but it is the accountant in charge responsibility to correct the errors made. Fraud and other illegal acts, are considered intentional mistakes. Illegal acts are considered to be illegal political contributions, bribes, and kickbacks (Kieso, Weygandt, & Warfield, 2013). These types of mistakes can cause damage to the company, because they had made unethical decisions. Withholding information, or altering information can cause investors, creditors, and other users to invest resources in a business that cannot afford to pay them back. In return, investors and creditors are able to file a lawsuit, in which will result in high settlements. Under the Sarbanes- Oxley Act, companies that have illegally documented financial information can face legal consequences, such as very high fines, and a long sentence in jail time (Kieso, Weygandt, & Warfield,

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