Reference no: EM13574018

Financial reporting has been likened to cartography:

Information cannot be neutral-it cannot therefore be reliable-if it is selected or presented for the purpose of producing some chosen effect on human behavior. It is this quality of neutrality which makes a map reliable; and the essential nature of accounting, I believe, is cartographic. Accounting is financial mapmaking. The better the map, the more completely it represents the complex phenomena that are being mapped. We do not judge a map by the behavioral effects it produces. The distribution of natural wealth or rainfall shown on a map may lead to population shifts or changes in industrial location, which the government may like or dislike. That should be no concern of the cartographer. We judge his map by how well it represents the facts. People can then react to it as they will.

Required:

a. Explain why neutrality is such an important quality of financial statements.

b. Identify examples of the lack of neutrality in accounting reports.