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Importance of Financial Reporting
Frequently, the allegation is made that financial
reporting is requisite to the effective functioning of the
American economic system. Not only does it provide the
basis for the accumulation and the direction for the flow of
capital, but it also provides the basis for the distribution
of wages, interest, rent, and profits among labor, capital,
land, and enterprise.^ This alleged importance is stated
aptly by Spacek in describing financial reporting as ". . .
the principal line of communication in our economic system
• • • •
ii 4
The loss or impairment of confidence in financial
reporting "... could be a major public relations problem
2. John C. Burton (ed.), Corporate Financial
Reporting; Conflicts and Challenges (New York: American
Institute of Certified Public Accountants, Inc., 1969),
p. 1; Arthur K. Watson, Address at 8th International
Congress of Accountants, September 24, 1962; Andrew Barr,
"Trends in Corporate Financial Reporting," Financial
Executive, 35:15, September, 1967; John L. Carey, The CPA
Plans for the Future (New York: American Institute of
Certified Public Accountants, Inc., 1965), p. 149; Malcolm
M. Devore, "The Meaning and Significance of Financial
Statements," in Haskins & Sells Selected Papers, 1967 (New
York: Haskins & Sells, 1968), p. 48; and Howard I. Ross,
"The Current Crisis in Financial Reporting" (Statements in
Quotes), The Journal of Accountancy, 124:65, August, 1967.
3. Burton, op. cit., p. 1; Howard F. Stettler,
"Meaningful Financial Statements" (Letters), The Journal of
Accountancy, 109:23, January, 1960; Leonard Spacek, A Search
for Fairness in Financial Reporting to the Public (Chicago:
Arthur Andersen and Co., 1969), pp. 150, 171; and Thomas D.
Flynn, "Corporate Executives View Accounting Principles,"
The Journal of Accountancy, 119:33, June, 1965.
4. Spacek, op. cit., p. 120.
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