Final answer:
Completeness is a component of faithful representation (option b) in financial reporting, and it ensures that all relevant information that would affect users' understanding is included. This differs from verifiability, relevance, and understandability, which are other qualities of financial information but do not directly relate to the notion of completeness.
Step-by-step explanation:
Completeness is an ingredient of the primary quality of faithful representation. In the context of financial reporting, faithful representation includes completeness, neutrality, and free from error as its components. To have a complete representation means that all the information that could affect a user's understanding of the reported financial events is included. In other words, nothing is omitted that would be relevant to the user's understanding.
Let's use an example for clarification. If a business provides financial statements to its stakeholders, the principle of completeness ensures that all the necessary information is included within those documents. Therefore, if certain liabilities or assets were excluded, the business would not be adhering to the principle of completeness, thus compromising the faithful representation of its financial position.
It's important to note that verifiability, relevance, and understandability are also qualities sought after in financial information, but they do not encapsulate the notion of completeness the same way faithful representation does. Verifiability means that different knowledgeable and independent observers could reach consensus, though not necessarily agreement, that an assertion is reasonably free of error and bias and represents what it purports to represent. Relevance implies the ability of the information to make a difference in a decision-making process, and understandability denotes the quality of information that enables users to comprehend its significance.