Sound Financial Reporting is the key to efficient operation of capital markets. It also has high economic-efficiency enhancing value. But ironically, in spite of best intentions, lack of transparency and ethics in the financial reporting has become one of the controversial issues affecting the corporate world and accounting profession today. The present article looks into the controversial subject of Financial Reporting from economic and ethical perspectives and explores the ongoing issues surrounding it. It also examines the ethical dilemma encountered by the auditors in maintaining independence.

With the development of joint stock culture and capital market, sound financial reporting coupled with availability of information is the expectation of all in every walk of life. It has come to a stage to be recognized as a matter of right of all the stakeholders. It is also a powerful tool to enforce market discipline and helps in public understanding of the corporate's structure and activities, facilitating efficient allocation of resources, enhancing confidence in the capital market. Investors, creditors, employees and other stakeholders, as well as the government and public at large rely on sound financial accounting and reporting for a variety of reasons that have an impact on the economic well-being of the community and the nation.

Concurrently, issues relating to financial reporting routinely come to the fore at frequent intervals with every case of corporate scam, bankruptcy and systematic crisis, entailing considerable cost to the community.The need for more meaningful financial disclosure and enhanced transparency was amply highlighted in the wake of dramatic collapse of Enron Corporation in 2001. Domestically too, the country is not immunized to the unpleasant consequences as was demonstrated in the case of Global Trust Bank, where financial assessments of auditors and supervisors varied widely leading to its fall.

The Accounting World Magazine, Financial Reporting, Capital Markets, Corporate World, Financial Accounting, Financial Assessments, Financial Reporting Standards, Domestic Investments, Indian Corporate Sector, Corporate Governance, Indian Economy, Globalization, World Trade Organization, WTO, Global Economy.