Identify which qualitative characteristic of financial reports is best described in each item below:
The financial reports of Curl Curl Ltd are audited by a chartered accountant.
Curl Curl Ltd and Bondi Ltd both use fair value accounting to recognise financial instruments.
Curl Curl Ltd authorises issue of its financial reports prior to the shareholders' meeting.
A)relevance,comparability,timeliness.
B)reliability,consistency,understandability.
C)reliability,comparability,timeliness.
D)relevance,understandability,comparability.
E)None of the given answers.

Question

Quizplus · Accepted Answer

The qualitative characteristics of financial reports are designed to ensure that the information provided is useful to users in making economic decisions. The characteristics mentioned in the options are relevance, comparability, timeliness, reliability, consistency, and understandability. Let's analyze each item to identify which characteristic is best described:
1. The financial reports of Curl Curl Ltd are audited by a chartered accountant.
   - This item is related to the reliability (also known as faithful representation) of the financial reports. An audit by a chartered accountant aims to ensure that the financial statements are free from material misstatement and accurately represent the company's financial position.
2. Curl Curl Ltd and Bondi Ltd both use fair value accounting to recognise financial instruments.
   - This item is related to comparability. When companies use the same accounting principles, such as fair value accounting, it allows users to compare financial information across different entities.
3. Curl Curl Ltd authorises the issue of its financial reports prior to the shareholders' meeting.
   - This item is related to timeliness. Providing financial reports before the shareholders' meeting ensures that the information is available to users in time to make informed decisions.
Based on the analysis above, the qualitative characteristics best described in each item are:
1. Reliability
2. Comparability
3. Timeliness
Therefore, the correct answer is:
3. reliability, comparability, timeliness.

Identify Which Qualitative Characteristic of Financial Reports Is Best Described