Final answer:
The responsibility for the financial statements rests solely with management. External auditors provide an independent opinion, but the management must ensure statements are accurate and reflect the company's financial status as per accounting standards.
Step-by-step explanation:
The question of who bears the responsibility for the financial statements is a significant aspect of corporate governance and accounting. The correct answer to this question is B) Solely with management. It is management's responsibility to ensure that the financial statements accurately reflect the company's financial position and performance by the relevant accounting standards.
While external auditors are engaged to provide an independent opinion on whether the financial statements present fairly, in all material respects, the financial position and performance of the company, they do not assume responsibility for the statements themselves. The external auditor's role is to assess the financial statements and provide reasonable assurance that no material misstatements are present. However, the final responsibility lies with management, who must also ensure that adequate internal controls are in place to prevent and detect fraud or error.
The internal audit function, mentioned in option C, is designed to test and improve the internal control processes of the organization. Internal auditors report on the effectiveness of internal controls, among other duties, but they do not have responsibility for the financial statements either.
In conclusion, while auditors—both internal and external—play important roles in the financial reporting process, it is management who assumes sole responsibility for the financial statements of an organization.