Question

Joe Marzetti has been the controller of Fairview Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Marzetti. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible

Answer 1

The characteristic of useful financial information absent in the situation described is F) Verifiable, meaning the auditors cannot confirm the accuracy of financial reports.

Step-by-step explanation:

In the scenario where auditors cannot reproduce financial reports that were prepared by Joe Marzetti, the characteristic of useful information that is missing is Verifiable. Verifiability means that different knowledgeable and independent observers can reach a consensus that the information is a faithful representation of what it purports to be. In this case, since the auditors are unable to verify the accuracy and consistency of the financial reports, the information fails the verifiability characteristic. Useful financial information should allow users to confirm or correct prior expectations based on independent assessments or a consensus among observers. Without verifiable information, financial decisions may be compromised, and there is a potential for adverse effects on the firm's access to financial capital.