Final answer:
The statement is false. Financial ratios are important in revealing possible misrepresentations in financial statements, such as understated liabilities.
Step-by-step explanation:
The statement that comparing financial relationships such as interest expense and debt, or the amount of warranty expense as a percentage of sales, is not helpful in identifying symptoms of understating liabilities is false. Financial ratios and comparisons can be very revealing when evaluating the likelihood of misrepresented financial statements. For instance, if the interest expense ratio is significantly lower than what would be expected given the amount of debt, it may indicate that the company is understating its liabilities. Similarly, if the warranty expense as a percentage of sales is consistently lower than industry averages without a clear explanation, it may suggest that a company is not adequately estimating its future warranty liabilities, potentially underreporting its expenses and liabilities.