Question

As a Certified Public Accountant (CPA), Tanvi understands the importance of audited financial statements. Which of the following is incorrect regarding the importance of audited financial statements?

a) They provide credibility to financial information
b) They ensure compliance with tax laws
c) They guarantee profitability for the company
d) They help in detecting errors and fraud

Answer 1

Audited financial statements provide credibility, ensure compliance, and help detect errors and fraud, but they do not guarantee profitability.

Step-by-step explanation:

Audited financial statements play a crucial role in providing credibility to financial information, ensuring compliance with tax laws, and helping in detecting errors and fraud.

However, audited financial statements do not guarantee profitability for the company.

While they can provide valuable insights into a company's financial health, profitability depends on various factors such as market conditions, competition, and management decisions.