Final answer:
The correct answer to the question is A. On the basis of conditions existing at year-end. Financial statements are prepared at year-end to reflect accurate financial conditions and include events throughout the year that impact finances, but are not specifically approved by the SEC as part of the preparation process. Option d is the correct answer.
Step-by-step explanation:
The financial statements are prepared by client management and reflect the company’s financial conditions and results. It is crucial that these statements provide an accurate and fair view of the company’s financial performance and position at the end of the fiscal year. As such, the correct answer to the question is A. On the basis of conditions existing at year-end. Financial statements are designed to reflect the results of operations, financial position, and cash flows based on conditions that exist at the end of the fiscal year. This includes any events that have occurred throughout the year that may affect the company's financial position.
It is important to note that while the financial statements are indeed prepared on the basis of conditions existing at year-end, they should also incorporate material events that happen post-year-end if they provide additional information about conditions at the year-end. In the context of the answer options, while the statements do consider activities throughout the year to provide a comprehensive overview, the critical point is that they are prepared as of the year-end date.
Regarding option D, it is important to clarify that financial statements are indeed filed with the Securities and Exchange Commission (SEC) if the company is publicly traded, but this is done after they are prepared and finalized by management. Approval by the SEC is not part of the preparation process of the financial statements; the SEC's role is mainly to ensure that the company has complied with all the legal and regulatory requirements for financial reporting.