Importance of Financial Reporting The collapse of corporate giants like Enron and WorldCom has raised the looming question, which always remains in an investor's mind: "Can I trust my hard work?" earned Capital in someone else's hands?" It is not the first time that investors lose faith in companies, however the fact does not change that the cost of capital in the market has increased significantly for companies. Investors have started to invest their capital in risk-free securities rather than in corporate shares. Investors also began to look with disdain and doubt at a company's financial statements because some of these collapses were preceded by financial frauds cleverly covered up by the management of such companies Investors have reached a point where they no longer trust the financial reports provided by the company. However, some intellectuals believe that financial reporting has no importance for investment decisions of the financial reports are historical and have already been taken into account when deciding the company's share price and also do not give an idea of ​​the future position of the company. On the other hand there are also some intellectuals who argue that there are still many investors who make their investment decisions based on a company's financial reports. Ask investors what kind of financial information they want companies to release and you'll likely hear two words: more and better. But let's face it, some companies' financial statements are designed to hide rather than reveal information. So what would ensure investor confidence in companies and their governance? The answer is a good, future-oriented and more transparent financial reporting system. There is no denying the importance of a good financial reporting system in ensuring sound corporate governance. There is now a clear need to restore confidence in capital markets and elsewhere by strengthening corporate governance to provide financial information of the highest quality. The lifeblood of markets is information, and barriers to the flow of relevant information represent market imperfections. The need to screen and correct information provided by companies adds costs and uncertainty to the market's pricing function. The more transparent companies' activities are, the more accurately their securities will be valued. A fundamental weakness of the current financial reporting system is the potential for different accounting treatments to be applied to essentially the same facts..