Why do the users of financial statements require information to be accurate and free from any material errors?

User Generated

purivrfzvyrf

Business Finance

Description

The new accounting clerks are beginning to gather information to complete financial statements. The accountants will first need to understand what type of information will be needed from the source documents and how these documents tie to financial statements. Before they can do so, they must fully understand who will potentially be reviewing the company’s financials and what type of information may be included. For this task, answer the following questions:

  • Why do the users of financial statements require information to be accurate and free from any material errors?
  • What are some problems that might occur if users of financial statements rely on inaccurate statements?
  • Why is it important for users of financial statements to understand the generally accepted accounting principles (GAAP)?
  • Explain the purpose and objective of source documents.

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Explanation & Answer

Attached.

Running head: FINANCIAL STATEMENTS

1

Financial Statements
Institution Affiliation
Date

FINANCIAL STATEMENTS
The information accrued from the financial statements is used as the basis for
coming up with different decisions. Thus, the information needs to be accurate in order to
come up with valid decisions. Inaccurate figures will often lead to wrong decisions being
made by the management and this is likely to operate the operation of the organization.
Stakeholders also use the information to access the financial position of the organization
and thus determine whether their investments are likely to accrue profit while investors
use the financial information to determine whether the business is a good investment.
Thus, wrong information will lead to the afo...


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