1.1 BACKGROUND OF THE STUDY
Accounting helps the managers and business owners to take the right decision while providing necessary information about a company’s financial performance and position. The purpose of financial statement is to provide reliable information about the financial position, performance, and relevant changes in financial position of accompany or business. Listed companies use financial statements as one of the major medium of communication with their equity shareholders and public at large (Cheng and Yang, 2003; Sloan, 1996; Hribar and Collins, 2002).
When these financial statements are released, they can have large impacts on the business and on the investors of the company. Therefore, it is critical for the companies to ensure that the information the statements present is correct.
Financial statements can have a drastic effect on the stock price of a company. Many investors look at the financial statements when making investment decisions. If information is presented in a financial statement that is better or worse than expected, it can send the stock price up or down. Investors often use financial ratios based on information from the financial statements to make assumptions. Because of this, the financial statements can have a serious effect on the investors of a business.
Financial statements can also have an impact on how easy it is for a business to get financing. If a company is trying to take out a business loan, the lender will typically want to look at the financial statements of that company. If the information on the financial statements is not flattering, it may negatively impact the ability of the company to borrow money. Lenders usually want to invest in companies that have good financial numbers.
Financial statements also have impact on new investors. When a company issues new shares of stock, it will most likely distribute financial statements to potential investors. The potential investors will examine the financial statements to determine if they want to put money into the company. Low earnings numbers could negatively impact the number of investors willing to put money into the company.
In some cases, financial statements can even affect other businesses. For example, a leading company in a particular industry releasing financial statements can influence that industry as a whole. Bad numbers by a leading company can sometimes lead to a negative outlook on other companies. This may drive down the stock prices on other companies in the same industry or sector of the market.
1.2 STATEMENT OF THE PROBLEM
Almost every economic entity maintains its records on a historical cost basis. The historical cost figures alone are inadequate. This is because net profit is over stated, the balance sheet does not reflect the current worth of the enterprises and inflationary situation, and the charging of the historical cost of operations to profit and loss account may endanger the maintenance of the operating capital of the entity. It is obvious that the current situation of published financial statement has some limitations. This is because the result of operation (net profit) is a function of accounting standards, policies and conventions adopted by a company and used in the preparation of the financial statements.
The financial statement should provide accurate financial information; which shareholders can effectively manipulate to get the best out of their investment. It is pertinent to say that analysis and interpretation of any financial statement will descend on the adequacy and accuracy of the said statement and how the financial information is being disclosed so as to enable to shareholder make major investment decision such as if to hold their shares or sell them and invest in bond other than equity. If they are to buy more share of the same firm, but the problem statements.
1.3 OBJECTIVES OF THE STUDY
The objective of this study is to find out the following:
(a) To find out if there is accuracy in financial statement prepare by Union Bank Plc.
(b) To determines if the financial statement prepared by Union Bank Plc provide transparent and reliable information.
(c) To evaluate whether the Union Bank Plc is consistent in the preparation of financial statement.
(d) To suggest ways of improving the accounting system in Union Bank Plc.