What Are the Dangers of Inaccurate Financial Reporting IN SME companies?
The bad numbers that are the result of inaccurate financial reporting lead to bad decision-making. For many small businesses that are too small to hire a full-time accountant, inaccurate reporting may be difficult to ferret out.
The owner may accept the reports on face value, which will distort his ability to track income and expenses as well as to budget accurately. Miscalculating profit is detrimental whether the number is too low or too high.
If profit is reported too low, it will result in the company being undervalued. If profit is reported too high, the consequence will be high tax liability.