Since external users of financial statements have no way to verify the reported information,
A)they cannot make informed decisions from financial information.
B)FASB provides consequences to companies who distribute false managerial accounting reports to outsiders.
C)GAAP provides a level of protection or assurance that the reports will follow certain standards.
D)internal reports are provided to them by management.

Question

Quizplus · Accepted Answer

GAAP (Generally Accepted Accounting Principles) provides a set of standards and guidelines that must be followed when preparing financial statements. Although external users cannot verify the reported information, following GAAP provides a level of assurance that the information has been prepared in a consistent and reliable manner. Therefore, external users can make more informed decisions based on the financial information that has been reported. Choices A, B, and D are incorrect because they do not provide a complete or accurate explanation.

Since External Users of Financial Statements Have No Way to Verify