Question

When reporting on financial statements that include only summarized totals of account balances, the auditors' conclusion should state whether the information in the summary financial statements

O is complete with respect to disclosures required by the SEC.


O is fairly stated, in all material respects, in accordance with generally accepted accounting principles.


O is consistent, in all material respects, with the prior years' summary financial statements.


O is fairly stated, in all material respects, in relation to the complete financial statements.

Answer 1

The auditors' conclusion should indicate that the summarized financial information is fairly stated in all respects relative to the complete financial statements, ensuring accuracy after the introduction of regulations like the Sarbanes-Oxley Act. The correct answer is O is fairly stated, in all material respects, in relation to the complete financial statements.

Step-by-step explanation:

When reporting on financial statements that include only summarized totals of account balances, the auditors' conclusion should state whether the information in the summary financial statements is fairly stated, in all material respects, in relation to the complete financial statements.

This conclusion is crucial as it ensures that the summary financial statements adequately represent the more detailed financial statements from which they are derived, and this relationship is a key component of providing accurate information to stakeholders.

After major accounting scandals, such as those involving Enron, Tyco International, and WorldCom, the Sarbanes-Oxley Act of 2002 was introduced to protect investors by increasing the reliability of corporate financial reports.

This act, among other provisions, emphasizes the importance of accurate financial disclosures and the role of auditors in attesting to the fairness of such information.