Forecasting financial statements Essay Example | Topics and Well Written Essays - 250 words

Forecasting financial statements - Essay Example The third step is the area of activity to be covered in the activity (Danielsson, 2011). In order to improve the accuracy of forecast, the forecasted financial statements should only cover a small period such as only a month. This is because forecasted financial statements that cover a long period are prone to distortion or inaccuracies arising from external factors that were unforeseen and therefore, not considered during the forecasting process. Markham (2006) stated that in 2005, the American Insurance Group engaged in an improper corporate valuation scheme whereby they told their traders to inflate their stock prices, which in turn lead to an inflated valuation of the company. In order to avoid such a scandal that occurred at AIG it is necessary to create rules that govern how corporate decisions should be made and they should be written in the corporation’s article of association. Secondly, the corporation’s decisions should based on a simple majority vote and incase a director of the corporation has a conflict of interest on the matter being addressed then the director should not be allowed to