Financial reporting Financial report is also called financial statement and is defined as the formal record of business activities

of a firm, organization or a person. When a company produces its financial report regarding its assets, liabilities and ownership equities etc. it is called a balance sheet. The purpose of making financial statements is to provide the customers the total information about financial status of the company and the change in its financial position etc. so that the customers may be able to make a fair and square decision by keeping all financial facts before them. Not only the customers, but the employees also need these statements. Employees, labor unions in particular have to make their demands by keeping the financial statement in their mind. They demand bonuses, medical facilities and other allowances by looking at the financial statement. You can guess the importance of the financial statement by the fact that when a company is in troubled waters, and looking for some investor, the investor first looks at the financial statement of the company. A financial statement reveals that whether the credentials of the company are fake or real. Whether the company is bluffing or playing fairly? Financial statements are of many types. Government financial statements, personal financial statements, audit etc. Governments financial statements are recorded in a different way from the business organizations and even the non-profit business organizations. These statements are helpful for the governments in taking loans from IMF, making budgets and giving loan to other nations. The whole economy of the governments is based on these statements. Personal financial statement is usually

demanded by the banks, from a person who is going to apply for some loan or financial aid. It helps the government to assess that how much credit the person already possesses and how much he needs. Audit or consolidated financial statement is the backbone of a company .if a company does its financial audit regularly and issues financial statements regularly, it is likely to gain the good repute among the customers and the market rapidly. Whereas an organization which doesnt bother to go for an audit, its repute is likely to go down. Consequently the investment and the profits of the company are affected severely. Id like to discuss the case of Shaukat Khanam Memorial Trust here. It is a cancer hospital located in Lahore, Pakistan. It treats needy cancer patients absolutely free. It doesnt charge a single penny from them. For this it requires the donations, alms etc. from the society. This hospital is run by a board of governors. The chairman of which is a renowned cricketer Mr. Imran Khan. Imran Khan had established this hospital and hes been in politics as well. It was just a few months before the national elections of Pakistan in 2013, that a political figure of one of the biggest political parties of Pakistan accused that the board of governors of SKMT was not running the trust transparently and that the board had invested its money in the business of some close relative and friend of one of members of board of governors of SKMT. That political person who accused so also said that SKMT hadnt done an audit for the last two years. At these accusations, there was a storm in media. Everyone started discussing this topic in talk shows. Fingers were being pointed at the credibility of Imran Khan. It was being

said that he couldnt handle the board of governors transparently, howll he run the country if he gets elected and much more stuff like that. Mr. Imran Khan then broke the silence on the media and told the media that SKMTs website had a complete record of its annual audits since when it was established and that it had whole financial statements available on it, anyone could check it. He said that no risky investments were made with the donations of the people. Regarding the accusation that the website didnt mention the audits of 2011 and 2012 available, he said that the audit of 2011 was underway. Moreover, the audits were done by not any third class company but the leading audit company of Pakistan and one of the most well reputed companies, Fegusons. So there couldnt arise a question of the transparency of the audit reports, since one of the best firm was doing it for years. What was the outcome of all this matter? Mr. Khans SKMT didnt suffer a loss because apart from his own credibility, he had ensured to make audit reports and financial statements available to the public. The accuser had to take the face palm and was heavily criticized for accusing so. As a matter of fact, some of those who were not aware of the SKMT, started giving their donations, alms etc. to SKMT. As a rough guess, SKMT has been earning more than the estimated figures since then. Why? Because they had retained their credibility through financial audits and reports. Each and everything was consolidated and clear in those reports and statements as a result of which they won appraise from the public as well as the sympathies and along came the increase in donations i.e. in flow of the money, from both inside the country as well as the outside of the country.

References: Penman, S. H., & Penman, S. H. (2007). Financial statement analysis and security valuation. Lev, B. (1974). Financial statement analysis: a new approach (pp. 149-151). Englewood Cliffs, NJ: Prentice-Hall. Abbott, L. J., Park, Y., & Parker, S. (2000). The effects of audit committee activity and independence on corporate fraud. Managerial Finance, 26(11), 55-68. http://www.shaukatkhanum.org.pk/about-us/annual-report.html