Forms of Business Organisation (II): Incorporated Businesses

Abstract

The need to produce financial accounting reports is greater for incorporated businesses than for unincorporated businesses for a number of reasons including:

• (i) the separation of ownership from control, giving rise to the need to provide stewardship reports;

• (ii) the privilege of limited liability status, requiring some counter-measures to protect creditors’ interests and to ensure their continued cooperation;

• (iii) the size and influence of the corporate sector, requiring some degree of accountability to the public at large.

Although reporting requirements may be placed on individual companies by the shareholders and even at times by the creditors, specific reporting requirements are placed on all companies by company legislation. In addition, the recommendations made in Statements of Standard Accounting Practices (SSAPs) are generally more likely to be followed by the corporate sector, not least because of the need for auditors to report on compliance with the SSAPs.