The audit of the financial reports of Matilda Plc had been completed except for the outcome of a material contingent liability that is still subject to the outcome of a court decision.The case is still ongoing but it is expected that a decision will be made after three months.The deadline for submitting the financial reports is next month.Which action is consistent with the notion of 'timeliness' in the preparation of financial reports?
A)Matilda Plc should wait for the court decision to be completed before releasing the financial reports as the amount of the liability is material.
B)Matilda Plc should release the financial report on or before the deadline but exclude the contingent liability from the report as the outcome is still uncertain.
C)Matilda Plc should release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts.
D)Matilda Plc must wait for the court decision to be completed before releasing the financial reports as it is expected to occur in the near future anyway (i.e.three months).

Question

Quizplus · Accepted Answer

The best choice is to release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts. This is consistent with the notion of 'timeliness' in the preparation of financial reports as it meets the deadline for submission while still providing information about the contingent liability. This will also ensure transparency and proper disclosure to stakeholders. Option A and D are not appropriate as they would result in a delay in releasing the financial reports, which is not timely. Option B is not the best choice because it does not provide sufficient disclosure about the contingent liability.

The Audit of the Financial Reports of Matilda Plc Had