Why is the efficient securities market hypothesis important for accounting?
A)When providing financial information, management need only consider the specifically identifiable users who they know will rely on the information.
B)Accounting standards can assume that the majority of market participants have a reasonable level of sophistication.
C)Individuals with information that is not publicly available cannot make significant profits.
D)Accounting information is the only source of financial information that markets use.

Question

Quizplus · Accepted Answer

The efficient securities market hypothesis is important for accounting because it suggests that markets are efficient and incorporate all publicly available information in the prices of securities. Therefore, accounting standards can assume that the majority of market participants have a reasonable level of sophistication and can use financial information to make informed investment decisions. This has implications for the relevance and reliability of accounting information.

Why Is the Efficient Securities Market Hypothesis Important for Accounting