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Are interim financial statements audited or are they reviewed?
I read somewhere that they are reviewed, but if they are only reviewed and we are not performing full procedures, then that means management has a higher chance of manipulating figures throughout the year and then showing true figures at year end.Unless there is a specific request for an audit of the interim figures, then the mst that will happen would be a review
But it’s a little naive to imagine that the directors are busy manipulating contentedly for 51 weeks of the year only to prepare in that last week a non-manipulated set of figures ready for the audit!
Systems work during the auditor’s collection of evidence about the controls / systems in operation for the annual audit will probably have uncovered this relaxed, happy and party-atmosphere manipulation
Besides, what are the directors achieving by this manipulation if they are then to reverse it all as at the year end?
Ok, we get distorted interim figures. But the imagine the market’s reaction when the final results are disclosed showing abnormal movement since the half year
In addition, the Stock Exchange’s own rules require entities to make public disclosure of matters such as ‘profit warnings’ and other significant events in the entity’s activities
“… that means management has a higher chance of manipulating figures throughout the year and then showing true figures at year end.”
It’s not going to happen … probably!
Yeah, thank you I got it
I was thinking that management could show a false image throughout the year and the share prices will increase dramatically as well. Shareholders and potential buyers would be really happy.But as you said that, if in the year end the true figures are shown, then the market will react really adversely tarnishing their reputation.
So no sensible company would do such a thing
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