1. Introduction

In the modern commercial environment, financial statements are essential tools that reflect the financial position and performance over a special period of a company. They are also a significant basis for enterprises and their shareholders to make decisions. Accuracy and transparency are two core characteristics of financial statements, which affect the reputation and competitiveness of companies in the market. Accurate financial statements can provide true and reliable information, help corporate managers make correct decisions, and enhance the trust of stakeholders such as investors and creditors. Transparency means the openness and clarity of a company's information disclosure, which can effectively reduce information asymmetry and enhance the company's image. With the rapid development of global economic integration and capital markets, investors' demand for corporate financial information is increasing, requiring companies to provide higher transparency and accuracy in financial reports [1]. Therefore, exploring the impact of the accuracy and transparency of financial statements on companies has important theoretical significance and practical value. It can help us understand how these factors influence corporate performance and stakeholder trust can enhance existing financial theories and frameworks. This article will systematically analyze the definition and importance of the accuracy and transparency of financial statements, and explore their impact on corporate decision-making, market performance and corporate image.

2. Basic concepts of financial statements

2.1. Types of financial statements

Financial statements typically include three key components: Balance Sheet; Income Statement; Cash Flow Statement.

The Balance Sheet offers a snapshot of a company's assets, liabilities, and shareholders' equity at a particular point in time. It reflects the company's financial position and is fundamental to assessing its solvency and liquidity [2].

Income Statement is also known as the profit and loss statement, this report summarizes the company's revenues, expenses, and profits or losses over a particular period. It is crucial to understanding the company's operational performance and profitability [2].

The Cash Flow Statement outlines the cash inflows and outflows within the company, which are categorized into operating, investing, and financing activities. It is vital for assessing the company's liquidity and its ability to generate cash [2].

2.2. Main functions of financial statements

The first function is to provide information on financial status. They serve as a comprehensive source of information about a company's financial health, enabling stakeholders to make informed decisions [3]. The second is to assist the management decisions. Financial statements offer critical insights that aid management in strategic planning, resource allocation, and performance evaluation. The third is to attract investors and financing. Transparent and accurate financial reports enhance investor confidence and facilitate access to capital by showcasing the company's financial viability.

3. Accuracy of financial statements

3.1. Definition and standards of accuracy

Accuracy in financial reporting refers to the degree to which the reported information reflects the true financial condition of the company. It is essential for maintaining stakeholder trust and ensuring compliance with regulatory requirements. In most cases, companies conduct accounting in accordance with the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) [4]. These two accounting principles are widely used around the world to promote the integration and development of the global capital market.These frameworks establish guidelines for financial reporting, ensuring that financial statements are prepared consistently and accurately across different jurisdictions. Today, with the increasing number of multinational companies, the transparency, accuracy and consistency of accounting information are increasingly required.

3.2. Impact of accuracy on company decisions

For companies, accurate financial data enable management to make informed decisions, reducing the likelihood of errors in judgment that could adversely affect the company's performance [5]. Also, it helps to enhance the resource allocation efficiency. When financial information is accurate, resources can be allocated more effectively, leading to improved operational efficiency and profitability.

3.3. Impact of accuracy on external market

For shareholders and investors, accurate financial statements foster confidence among investors, which can lead to increased investment and a higher market valuation. Accurate financial statements are also important to the credit decisions of enders. Financial institutions rely on accurate financial reports to assess creditworthiness [4]. Inaccurate information can lead to higher interest rates or denial of credit.

4. Transparency of financial statements

4.1. Definition and importance of transparency

Transparency in financial reporting refers to the openness and clarity with which a company presents its financial information. Transparent financial statements provide stakeholders with a clear understanding of the company's financial health [6]. Transparency reduces information asymmetry by ensuring that all relevant information is available to stakeholders, thus minimizing the risk of misinterpretation or misinformation.

4.2. Impact of transparency on company image

One of the most significant purposes is to enhance the company reputation. High levels of transparency improve a company's reputation, making it more attractive to investors, customers, and other stakeholders. Another impact is to build trust with customers and suppliers. Transparent financial reporting fosters trust and strengthens relationships with customers and suppliers, leading to enhanced business partnerships.

4.3. Impact of transparency on market performance

In market performance, transparency affects stock price volatility. Companies with high transparency usually experience lower stock price volatility because investors are more confident in the accuracy of the reported information [7]. It also influences investors' willingness to invest. Transparent companies tend to attract more investors since clear financial information reduces the perceived risks associated with investments.

5. The interactive relationship between accuracy and transparency

5.1. Mutual reinforcement of accuracy and transparency

Accurate financial information enhances transparency, as stakeholders can trust the data presented. Conversely, increased transparency encourages greater accuracy in reporting, as companies strive to maintain their credibility [8].

5.2. Risks of lacking accuracy and transparency

Potential for financial fraud. Inaccurate and non-transparent financial statements can lead to financial fraud, eroding stakeholder trust and causing long-term damage to the company's reputation. Legal and compliance risks are also big problems. Companies that fail to maintain accuracy and transparency may face legal repercussions, regulatory fines, and increased scrutiny from auditors and regulators.

6. Measures to improve accuracy and transparency of financial statements

6.1. Internal controls and audits

6.1.1. Control environment

Establishing a strong control environment is the foundation for effective internal controls. A culture of integrity and accountability is vital in promoting ethical behavior and compliance within the organization. Leadership commitment, ethical standards, awareness training and open communication are all essential to the environment controlling. To begin with the leadership commitment, senior management must demonstrate a commitment to ethical practices and integrity. This can be achieved by leading by example, communicating the importance of ethical behavior, and actively engaging in discussions about integrity and accountability. Next is about the ethical standards. Organizations should develop and disseminate a code of ethics that outlines expected behaviors and ethical standards. This code should be regularly reviewed and updated to reflect changing norms and regulations. Training sessions can help employees understand how to apply these standards in their daily activities. For awareness training, regular training programs should be implemented to educate employees about the importance of accurate financial reporting and the role of internal controls [7]. Employees should be made aware of the potential consequences of unethical behavior, not only for themselves but for the organization. And finally, about open communication. Open communication should be allowed and encouraged among employees to report unethical behavior or concerns without fear of retaliation. Whistleblower policies can be established to protect those who come forward with information about potential fraud or misconduct.

6.1.2. Risk assessment

Effective risk assessment is crucial for identifying vulnerabilities in financial reporting processes and ensuring the implementation of appropriate controls. The fundamental step in risk assessment is to identify risks. Organizations should carry out regular assessments to identify potential risks that might impact financial reporting. This involves evaluating both internal factors, such as process inefficiencies or a lack of expertise, and external factors, such as economic conditions or regulatory changes. Next is to evaluate the risks. Once risks are identified, they should be evaluated according to their likelihood and potential impact on financial reporting.This evaluation helps prioritize risks and allocate resources effectively to mitigate them. The most important process of this part is how to carry out it. Risk assessment should not be a one-time activity, it should be an ongoing process. Companies must continuously monitor their operating environment for changes that could introduce new risks or alter existing ones [9]. What’s more, integration with business strategy is also necessary. Risk assessments should be integrated into the overall business strategy. Understanding the financial risks associated with strategic decisions, such as entering new markets or launching new products, can help inform better decision-making.

6.1.3. Control activities

Implementing specific control activities is essential for mitigating risks identified during the assessment phase. These activities help ensure the accuracy and reliability of financial information. One of the most effective ways to reduce the risk of fraud is to segregate critical functions among different employees. For example, the person responsible for processing transactions should not be the same person who reconciles accounts. This division of responsibilities helps prevent any single individual from having unchecked control over financial processes. Another way is to establish approval processes for significant transactions, which adds an additional layer of oversight.For instance, large expenditures should require multiple levels of approval before being executed, ensuring that they are necessary and justified [9]. Doing regular reconciliations is also an effective method. Conducting regular reconciliations of accounts helps identify discrepancies and errors in financial records. This process should include comparing internal records with external documents, such as bank statements, to ensure consistency and accuracy. At the same time, automated controls can be used to enhance control activities. For example, alerts for unusual transactions or automatic transaction logging, can help detect irregularities and ensure compliance with established protocols.

6.1.4. Monitoring

Continuous monitoring of internal controls is essential for ensuring their effectiveness and adapting to changing circumstances. For monitoring, four parts are needed: routine reviews, performance evaluations, feedback mechanisms, and reporting as well as remediation [9]. Regular reviews of internal control processes allow organizations to identify areas for improvement. These reviews can be conducted by internal audit teams or external auditors, providing an objective assessment of control effectiveness. For performance evaluations, monitoring employee performance in relation to established controls can help identify training needs or areas requiring additional oversight. Regular feedback sessions can encourage accountability and reinforce the importance of compliance. The feedback mechanism is to establish channels for employees to provide feedback on internal controls can foster a culture of continuous improvement. This feedback can help identify weaknesses in controls that may not be apparent to management. Reporting and Remediation Organizations should maintain a system for reporting control deficiencies and ensuring timely remediation. A formal process for addressing identified weaknesses can help prevent recurrence and strengthen overall control systems.

6.2. Regular internal and external audits

For internal audit, regular internal audits help assess the effectiveness of internal controls and ensure compliance with established procedures. Internal auditors can identify weaknesses in the financial reporting process and make recommendations for improvements. Also, audits should be conducted regularly, with the frequency depending on the size of the organization and the complexity of its operations. Annual audits are common, but more frequent audits may be required for high-risk areas.

For external audit, hiring an independent external auditor allows for an objective assessment of the financial statements. External audits enhance credibility by assuring stakeholders that financial reports are accurate and comply with applicable accounting standards. A clear audit report from a reputable audit firm can go a long way toward enhancing stakeholder confidence, attracting more investors and facilitating better financing conditions.

6.3. Disclosure policy

A clear disclosure policy ensures timely and comprehensive disclosure of all relevant financial information. This transparency enables stakeholders to make informed decisions based on accurate data. The key elements are clarity, timeliness and accessibility: Clear guidelines develop clear guidelines outlining what information needs to be disclosed, including both quantitative and qualitative aspects of financial performance; Ensure timely release of financial information, especially during key reporting periods. Delayed disclosure can lead to speculation and erode trust; Make financial reports easily accessible to all stakeholders, including investors, analysts and regulators. This may involve posting reports on the company website and utilizing various communication channels.

6.4. Comply with applicable accounting standards

Companies should ensure that their financial reports comply with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP), depending on their jurisdiction [9]. Compliance with these standards helps maintain consistency, comparability, and transparency in financial reporting. It is necessary to train financial and accounting personnel on the latest accounting standards and disclosure requirements regularly. Staying up to date on regulatory changes ensures that companies remain compliant and reduces the risk of inaccuracies.

6.5. Application of technology tools

6.5.1. Optimizing financial reporting with tools

Two data tools can be used in financial reporting which is Implementing Advanced Financial Software and Data Analysis. Implementing advanced financial software can automate many aspects of financial reporting, thereby reducing the possibility of human error. These tools can streamline processes such as data entry, calculations, and report generation, improving overall accuracy. Data analysis tools allow companies to analyze financial data in real time. This feature helps identify trends, anomalies, and potential risk areas, enabling proactive management of financial performance.

6.5.2. Application of blockchain technology in financial transparency

Blockchain technology can be applied because of its three characteristics: transparency and security, real - time data sharing, and smart contracts [10]. Transparency and security provide a decentralized and secure way to record financial transactions. The technology ensures that data cannot be altered once entered, thereby improving the integrity of financial reporting. Real - time data sharing allows stakeholders to share financial information in real time, reducing information asymmetry. This transparency can enhance trust and promote smoother interactions between companies and their investors, customers, and regulators. Smart contracts on the blockchain can automate complex financial transactions, ensuring that all parties abide by the agreed terms [11]. This reduces the risk of disputes and improves the reliability of financial reporting.

7. Conclusion

In conclusion, this article tried to find the relationship between ‘the accuracy and transparency of financial statements’ and ‘companies, investors and markets’ and finally find out that the accuracy and transparency of financial statements are truly critical factors that influence a company's performance, reputation, and stakeholder trust. Accurate financial reporting enhances decision-making, improves resource allocation, and fosters investor confidence, while transparency builds trust and strengthens relationships with stakeholders. To enhance these attributes and make higher quality financial reports, companies should invest in robust internal controls, adopt clear information disclosure policies, and leverage modern technology. By prioritizing these aspects, companies can achieve sustainable growth and maintain a competitive edge in the marketplace. But this article also has some limitations. The research only includes some limited theoretical parts and does not analyze problems with specific cases. Moreover, more essays and articles should be referred to in this article. Future research could explore the impact of emerging technologies on financial reporting and the evolving expectations of stakeholders regarding transparency and accuracy with some case analyzing and refers more essays and articles.