You are leading a team of employees gathered from a cross section of operational areas within the firm to begin an evaluation of the firms financial reporting system. You have been presented with the most recent quarter ending financial statements and you are free to request whatever financial information you believe to be necessary. You understand that the outputs from the system will be used to meet the needs of internal uses (performance evaluation and budgeting for example) and external users (creditor and prospective owner decisions for example). Reflect upon the following concepts as they should influence your evaluation and potential improvement of the system:

a. Conservatism

b. Accuracy in financial reporting (what does accurate mean in the world of financial reporting)

c. The Matching Principle (one of the normal areas of misleading uses of financial information is to manageearnings.)