Drawback

School: Grand Canyon University - Course: ACC 502 - Subject: Accounting

I chose to discuss the influence of consistency on financial statements. The consistency of the financial information will show the longevity of the company and what it is actually capable of. It is hard for a viewer of a financial statement to make an accurate conclusion with inconsistent data. Consistency reflects a company that maintains the same methods and principles throughout every accounting period; easing the record keeping of business transactions and comparing different financial statements. This also makes it easier to examine trends and patterns. However, inconsistency can also show errors or mistakes in a financial statement. For example, if a company has a $5,000 rent expense each month and all of a sudden one month there is not, it is safe to say something wrong has occurred in the financial statement. The existence of inconsistency can also show embezzlement, fraud, and misuse of assets as well as inconsistency between a firm's narrative disclosure and its financial performance (Chou et al., 2018). This is an example of an extreme drawback stemming from this particular qualitative characteristic. References: Chou, C.-C., Chang, C. J., Chin, C.-L., & Chiang, W.-T. (2018). Measuring the Consistency of Quantitative and Qualitative Information in Financial Reports: A Design Science Approach.Journal of Emerging Technologies in Accounting,15(2), 93-109. https://doi- org.lopes.idm.oclc.org/10.2308/jeta-52312

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