Failing to Provide Full Disclosure

In: Business and Management

Submitted By delaneyphx
Words 767
Pages 4
Consequences of Failing to Provide Full Disclosure There is a wide range of potential outcomes for failing to provide full disclosure in accounting. At the very least, failing to provide full disclosure is unethical, especially if the intention is to mislead about the true nature of business operations. A company could seriously damage its relationship with creditors, investors, regulators, and other third parties if they are found to be willfully withholding important information. In some cases, this could lead to a lawsuit if it resulted in damages to the third party. For example, if a company withheld information from it’s creditors and then defaulted on a loan, the creditor could likely sue for damages. Public companies are sued on a regular basis for failing to disclose relevant information to investors. On the other end of the spectrum, failing to provide full disclosure could be a criminal act under the Sarbanes-Oxley Act. Executives who failing to disclose information could be criminally liable if this was done with the intention of defrauding investors. This is a relatively new penalty that was implemented after many major corporate scandals, such as Enron and Tyco, among others. Although it takes an extreme disregard for the full disclosure principle to reach criminal penalties, it ensures that executives at publically traded companies are held to a high standard of financial reporting and honesty.
Statement of Cash Flows
The statement of cash flows is essential to understanding which business activities have the largest impact on a company’s use of cash. Three major categories are identified in the statement of cash flows, which include operating activates, investing activities, and financing activities. Several major functions are provided by this statement and it is commonly used by investors and creditors in the decision making process.
The…...

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