Synopsis
Think of a financial statement as a mirror. The job of that mirror is to show everything as it is, with all the wrinkles, blemishes, and scars. But what if someone quietly and cleverly covers these up? The reflection suddenly looks better than reality. That is what happens when expenses and liabilities go unrecorded or unrecognised. Every rupee of expense left out makes profit look bigger, and every liability skipped makes equity appear stronger. When auditors notice this, they cannot stay silent. They modify their opinion, effectively telling you: “This picture might be looking prettier than reality.”
Let’s start by going back a bit. To school. Class 11 commerce students are taught the “principle of prudence”: Anticipate all likely losses, but never anticipate profits. In practice, prudence means recording expenses and liabilities as soon as they are likely to happen in the near future, even if the exact amount is not yet clear. In the first part of this series, we learnt how to read an audit opinion and why those carefully chosen words
- FONT SIZE
AbcSmall
AbcMedium
AbcLarge
Uh-oh! This is an exclusive story available for selected readers only.
Worry not. You’re just a step away.
What’s Included with
1Invest Wisely With Smart Market Tools & Investment Ideas
Investment Ideas
Grow your wealth with stock ideas & sectoral trends.
Stock Reports Plus
Buy low & sell high with access to Stock Score, Upside potential & more.
BigBull Portfolio
Get to know where the market bulls are investing to identify the right stocks.
Stock Analyzer
Check the score based on the company’s fundamentals, solvency, growth, risk & ownership to decide the right stocks.
Market Mood
Analyze the market sentiments & identify the trend reversal for strategic decisions.
Stock Talk Live at 9 AM Daily
Ask your stock queries & get assured replies by ET appointed, SEBI registered experts.
2Stay informed anytime, anywhere with ET ePaper
ePaper – Print View
Read the PDF version of ET newspaper. Download & access it offline anytime.
ePaper – Digital View
Read your daily newspaper in Digital View & get it delivered to your inbox everyday.
Wealth Edition
Manage your money efficiently with this weekly money management guide.
3Exclusive Insights That Matter
4Times Of India Subscription (1 Year)
TOI ePaper
Read the PDF version of TOI newspaper. Download & access it offline anytime.
Deep Explainers
Explore the In-depth explanation of complex topics for everyday life decisions.
Health+ Stories
Get fitter with daily health insights committed to your well-being.
Personal Finance+ Stories
Manage your wealth better with in-depth insights & updates on finance.
New York Times Exclusives
Stay globally informed with exclusive story from New York Times.
5Enjoy Complimentary Subscriptions From Top Brands
TimesPrime Subscription
Access 20+ premium subscriptions like Spotify, Uber One & more.
Docubay Subscription
Stream new documentaries from all across the world every day.
