Statement of Financial Accounting Concepts No

question 21

Essay

Statement of Financial Accounting Concepts No. 1, "Objectives of Financial Reporting by Business Enterprises," identifies investors and creditors as the primary users of financial reporting information. Investors in public companies express their opinions about an entities equity securities through organized exchanges such as the New York Stock Exchange. Given that investors represent one of the two primary groups to which financial reporting is directed, accountants and auditors preparing and opining on, respectively, the financial statements of public companies should be aware of the effects of the quality of financial reporting on stock prices.
Required:
Identify four major periods of decline in worldwide stock prices for the years 1997 through 2002 and discuss the role (if any ) of financial reporting in these declines.

---

Definitions:

Buyer Interaction

The dynamics and exchanges between buyers in a market, which can influence price, demand, and supply conditions.

Monopsony Power

Refers to a market situation where there is only one buyer for a particular product or service, giving that buyer significant control over prices and terms.

Outside Suppliers

External entities or companies that provide goods or services to another company, often playing a critical role in supply chains.

Equilibrium Wage

The salary level at which the supply and demand for workers are equal.