Executive Summaries of Article Essay Example | Topics and Well Written Essays - 500 words

Executive Summaries of Article - Essay Example Items that have to be shown in investing activity are shown as operating activity. Moreover, when such items are rectified for classification, the re-statement of the figures is not done (Daniel, Susan, & Dana, 2007). Controls should be so efficient that they are capturing the correct classification of the items each year. Such misclassifications mislead the users of the statement of cash flows. Secondly, when classifications are done, they should be re-stated as per the Generally Accepted Accounting Principles. Since, this re-statement is not being done, the ratio of current years and that of comparatives are also being distorted. Such inconsistency in the ratios affects the decision making of the investors. 1. Untrained Staff: There is untrained staff, which is not capable of preparing Ha cash flow. The staff is not technically sound due to lack of knowledge and training. Many a times the staff is not even capable of adjusting the profit for non-cash items. Qualified and experienced staff should be hired to remove these errors. 2. Lack of Adequate Review: It is observed that the senior management does not appropriately review the statement of cash flows. There are some complex items in the cash flow, which come in the form of balancing figures such as taxes paid. These figures are difficult to be calculated. Junior staff may manipulate such figures to balance the cash flow statement. Such manipulation could be rectified at initial stage if reviews are done in detail. 3. Misclassification of Balance Sheet items: It is observed that the balance sheet items are not classified appropriately. The items of short-term investments such as securities, which are highly liquid in nature, are classified as a cash equivalent. Such misclassification eradicates the item from investing items in the cash flow. 4. Consolidation weaknesses: The consolidation process is a complex process that