Financial Analysis and Reporting (Assignment No.

1)

1. What are the roles of management and the auditor in the presentation and integrity of financial
statements?

***Management is responsible for the preparation, presentation and integrity of the financial
statements and for setting up a reliable system of internal controls over financial reporting that is
designed to provide reasonable assurance that assets are safeguarded from loss and that transactions
are executed and recorded in accordance with the established procedures. The auditor is responsible for
auditing the financial statements and the internal controls over financial reporting that is based with the
generally accepted auditing standards.

2. What is the purpose of the SEC’s integrated disclosure system for financial reporting?

***The integrated disclosure system is premised on the belief that investors expect to be furnished with
the same basic information package both to support current information requirements of an active
trading market and to provide information in connection with the sale of newly issued securities. Its
purpose is to improve disclosure to investors and other users of financial information, to achieve a single
disclosure system at a reduced cost, and to reduce current interference to combining shareholder
communications with official SEC filings.

3. What are the major sections of a statement of cash flows?

***The major sections of a statement of cash flows are the cash from operating activities that is related
to net income, cash from investing activities that’s related to noncurrent assets, and cash from financing
activities that is related to noncurrent liabilities and owner’s equity.

4. What are the three major categories on a balance sheets?

***The three major categories on a balance sheet includes the assets which are the probable future
economic benefits owned or controlled by the entity; the liabilities which are the probable future
sacrifices of economic benefits; and lastly is the owner’s equity which are calculated as the residual
interest in the assets of an entity after deducting liabilities.