Many financial reports produced by organizations are nondiscretionary–publicly traded firms have no choice but to prepare income statements, tax returns, etc. Management reporting is often called discretionary reporting because it is not mandated, as is financial reporting. Is this a valid statement? Why or why not?

Answer 1

It can be argued that an effective MRS is mandated by SOX legislation which requires that all public companies monitor and report on the effectiveness of internal controls over financial reporting. Management reporting has long been recognized as a critical element of an organization's internal control structure. An MRS that directs management's attention to problems on a timely basis promotes effective management and thus supports the organization's business objectives.