Finance question help?

Question

Financial statements are based on generally accepted accounting principles (GAAP) and audited by CPA firm, so do investors need to worry about the validity of those statements?

Answer 1

I would always be a little worried.  We shouldn't have to worry about them being correct, but greed is not good in this case.  I would for the most part trust what you are seeing on financial statements.  However, if the accounting is overly confusing or looks fish, I would stay way.  It also helps to listen to the conference calls when they report earnings.

Answer 2

Yes, thats the reason for regulations like Sarbanes-Oxley, vis-a-vis Enron and the underpinnings of GAAP.