The notes (or footnote disclosures) are required by the full disclosure principle because the amounts and line descriptions on the face of the financial statements cannot provide sufficient information. In fact, there may be some large potential losses that cannot be expressed as a specific amount, but they are critical information for lenders, investors, and others. Auditors will also use the financial statements and their footnotes to help understand the company’s financial position. Their findings within the audit will be based almost as heavily on the footnotes as the other core areas of the financial statements. The absolute numbers in financial statements are of little value for investment analysis unless these numbers are transformed into meaningful relationships to judge a company’s financial performance and gauge its financial health. It’s management’s opportunity to tell investors what the financial statements show and do not show, as well as important trends and risks that have shaped the past or are reasonably likely to shape the company’s future. Some corporations may be required to have their external financial statements audited. This requires independent certified public accountants to provide assurance that the financial statements present fairly the financial position, results of operations, and cash flows […]