Question

14. Who loses and who gains [discuss at least two losers and two gainers] after the private company financial accounting standards are introduced?

Answer 1

Gainers:

1. Shareholders/Investors: The investors who take the risk of investing in a company are more safe when the books are drawn in accordance with the accounting standards. The same are also audited and the audit report gives them a clear knowledge of the state of affairs. It is an assurance and reliable too. They are protected from unscrupulous management decisions made by the management.

2. Employees: The employees are protected as the money which is being deducted by the company towards social contributions and tax withholding those actually have to be paid to the concerned authorities. Any shortcomings in these areas will be highlighted in the audit report and the same can be brought to the knowledge of shareholders.

Losers:

1. Directors: The directors who want to hamper the company by being involved in a while collar crime or by making unscrupulous decisions will be checked, and if these are found the same will be reported in audit report and brought to the knowledge of shareholders. Thus, the directors with this kind of motive stands to loose.

2. Employee collusion/fraud: If any employee were secretly involved in collusion or fraud for eg. misappropriation of funds and stock, etc that would be checked.