Financial Accounting Assignment: Stakeholder Impact Analysis Report

This report examines the impact of financial misstatements on stakeholders, specifically focusing on a case involving Carlos Pizza Pvt Ltd. The analysis explores how incorrect financial information, such as overstated profits, affects investors, suppliers, and creditors. It highlights the ethical implications of providing inaccurate data and the potential consequences for each stakeholder group. Investors may make poor investment decisions, suppliers might extend credit based on false profitability, and creditors could provide loans that lead to bad debts. The report emphasizes the importance of accurate and complete financial reporting for sound decision-making and the long-term sustainability of a company. The bibliography includes key references on ethical issues, government debt management, accounting reality, and financial reporting for managers.

INTRODUCTION TO FINANCIAL ACCOUNTING

(A)
Stakeholders are a group of persons without which the business cease to exist. They are the
persons who either affect or get affected by the activities carried out in an organisation. They
have interest in the working of the company as it affects their decisions regarding
investments. Stakeholders can be divided into two categories i.e. internal stakeholders or
external stakeholders. The internal stakeholders are directly related with the organisation like
employment, investment or ownership whereas the external shareholders are those that are
indirectly affected by the operations carried out by the management of the company.
Suppliers, creditors and other public groups are the examples of the stakeholders. It is not
important for anyone to have a formal relationship with the company but anyone who has an
informal relationship and gets affected by any decisions made by the management is said to
be a stakeholder (Donanldson, 2012).
The stakeholders should be provided with correct and complete information in order to make
appropriate decisions. Wrong information provided by the company can mislead the
stakeholders and which may result to loss of their wealth. In the given case, there has been a
misstatement found in the annual reports of Carlos Pizza Pvt ltd. However, this has been
informed to the managing director of the company who is of the opinion that this
misstatement can be fixed the next year. It is usual that all the stakeholders would take
decisions based on this overstated figures in the current year which would lead to taking
wrong decisions and there may be a huge loss to the shareholders (Hubig, 2013).
All the stakeholders will be affected by this in some way or the other. The ethical issues and
the impacts that this information can have on various stakeholders are as follows-
 Investors – We all know that higher profitability of the company attracts investors.
Investors like to invest in companies who have higher profitability and higher
growing prospects in future. Therefore, the investors may invest on the basis of this
overstated profit which may lead to huge losses in future. Normally, the company
aims at wealth maximisation of the shareholders but in such a case there will be a
huge loss in the wealth of the shareholders which may lead to loss of reputation of the
company and the company may not be able to survive in the long run.
 Suppliers- The suppliers are those people who provide goods on credit. They check
the credibility of their company by their ability to generate profits because if the

company will have lower profits or no profits then the company may default at
making full and timely payments (Mattessich, 2016).
 Creditors – Creditors are the people who provide loans to the companies. They
provide loan after checking the financial performance and the financial position of the
company. However, if wrong information is provided to them they may provide loans
on that basis which may further lead to bad debts when the company will not be able
to pay off its dues.
Therefore, we may conclude that it is the duty of the company to provide all the material
information of the company correctly and completely because it has an impact on the
decision making process of the investors (Pratt, 2009).

Bibliography
Donanldson, T. (2012). Ethical issues in business. New Jersey: Prentice Hall.
Hubig, A. (2013). Introduction of a New Conceptual Framework for Government Debt
Management. Wiesbaden: Springer Fachmedien Wiesbaden.
Mattessich, R. (2016). Reality and accounting. [S.I.]: Routledge.
Pratt, J. (2009). Financial Reporting for Managers: A Value-Creation Perspective. Hoboken:
John Wiley & Sons, Inc.