liability or responsibility

Topics: Balance sheet, Financial statements, Management Pages: 9 (3463 words) Published: February 1, 2014
Table of Contents

Executive summery
This assessment is divided to five parts, each part relevant to the understanding of responsibility and liability in the company by the company management. Introduction- will provide some information in the relation to the financial information. Why do we need it and how it has been develop across the years? It will also provide the base understanding of why we need the financial report and how he affects the responsibility or the liability of the company management. Liability versus responsibility- will provide some basics understanding about the difference between Responsibility and liability and what is the relation between them? Limited liability- I would try to answer some of the question as where it come from and why? How its effect the company, shareholders and stakeholders? What the resolute of it in our society? Manager Responsibility as agent- What their responsibility? Whom they working for? To whom they report and need to benefit? The assumption in the agent theory- Do we really know what going on in the company? Is the management of the company really doing what they suppose to do and inform us? The myth and the management perception- is there any hidden information on the corporation report? What the manager trying to achieve when the author the information? The management still have responsibility for their action? Conclusions- I will conclude all the information from the chapters above to how identify the hidden information in the corporate report. I also try to answer the question limited responsibility or limited liability in the respect to the management of the company.

Company report why and who is for?
After the South Sea Bubble question start to be raise about the ability and motivation of the director of such a company to conduct the oversight of the company asset in an honest manner. This problem was one of the reasons for the development of financial accounting and reporting. But also these issues develop the need for separation of the public and private actions of an individual and the need to record and account for the public action. In 1844 companies act was establish order companies to produce a balance sheet for share holders. This act has been replaced by the Joint Stock Companies Act 1856 with change the required to produce balance sheet required only for internal purposes of the company owners. Development and produce of corporate reporting such as balance sheet is the communication between the managers of the company and its owners. Increasing size of enterprises and the divorcing of ownership from management led to the development of accounting practice and corporate reporting. By 1890 enterprise were being accounted as ‘going concerns’ base upon a separation of capital from income and profit from trading and both recognition the divorcing of share holders from management. By the beginning of 20th century it was accepted that corporate have distinct from their shareholders and they are immortality, this was the acceptance that control of company action implied some liability for the effect of those action and the divorce of management from shareholders necessitated some protection for the shareholders. This was achieved by Companies Act 1900 who made compulsory the remuneration of auditors. As in that time auditor was legally employed by the company it was never been clear if the auditor employed by the shareholders and protect their interest or by the directors who have managing role in the company. In about that time accounting take place of facilitating the relationship between managers and shareholders although the main reporting function was to serve the shareholders the general public had no right to see or use its information. The Companies Act 1906 not required from companies to produce financial statement although Companies Act 1908 require the production of profit and loss statement and Balance sheet....
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