Your best friend from high school approaches you to invest in "e-track" an upcoming high-tech company which he is convinced will make huge profits in future.You are sceptical of the business venture and said you would have to look up the financial statements of the company before investing your own money.He sends you the financial report and noticed that the report is unaudited and does not provide prior year's results even though the firm had been operating for the last three years.
Based on the above information,which qualitative characteristics is lacking in e-tech's financial reports?
A)relevance and reliability.
B)relevance and timeliness.
C)comparability and consistency.
D)reliability and consistency.
E)reliability and comparability.

Question

Quizplus · Accepted Answer

Based on the information provided, the qualitative characteristics lacking in e-track's financial reports are reliability and comparability.
Reliability is compromised because the financial report is unaudited. An audited financial statement is one that has been reviewed by an independent auditor who confirms the accuracy and completeness of the information presented. Without an audit, there is no assurance that the financial data is free from material misstatement, whether due to fraud or error, which makes the financial report less reliable for decision-making purposes.
Comparability is lacking because the financial report does not provide prior year's results. Comparability in financial reporting means that the financial information of a company can be compared with that of other periods or other companies. This allows investors to track performance over time, identify trends, and benchmark against competitors. Without prior year's data, it is difficult to assess the company's financial performance trend and make an informed investment decision.
Therefore, the correct answer is 5. reliability and comparability.

Your Best Friend from High School Approaches You to Invest