What is financial reporting?

Regulatory institutions: Regulatory entities also gather and review business data from financial reports. Government entities, including the IRS and the and Securities Exchange Commission (SEC) monitor the compliance of financial reporting activities for tax and revenue documentation.

Industry consumers: Financial reporting is also important to educate consumers about company activities and create transparency in the market. Open communication about earnings, investment activities and charitable donations helps inform customers and can drive additional sales.

Unions and employees: Union organizations that represent employees monitor financial reporting to ensure members receive fair wages and treatment in the workplace. Financial statements are also beneficial to employees who can review reports to gain insight into the financial stability and long-term profitability of their companies.

Related: Financial Management: Purpose, Daily Functions and Examples
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Who regulates financial reporting?
Regulatory entities, including the SEC, IRS and Financial Accounting Standards Board (FASB) establish standards that outline protocols and required practices relating to financial activities and documentation. The SEC is responsible for overseeing capital markets and sets forth regulations for investment activities in stock markets. Depending on the type of business, capital market activity and funding, the SEC requires public companies and market participants to disclose financial information regularly for investors to review.
The FASB is a private regulatory entity that establishes and monitors the Generally Accepted Accounting Principles (GAAP). The GAAP provides a framework for financial processes that supports efficiency in reporting and ensures regulatory compliance with other standards.
Please note that none of the companies mentioned in this article are affiliated with Indeed.
This article is for informational purposes only and is not intended to constitute financial advice. Consult with a licensed finance professional for any issues you may be experiencing.