While awaiting a meeting in his firm's boardroom, the senior partner, Bill Goldsworthy, read the following statement in an article in the Globe & Mail: "The greater the perceived
Quality of the information contained in the financial statements, the more likely it will be relied
Upon by the users of that information." This statement best describes
A) the expectations gap.
B) agency theory.
C) information hypothesis.
D) insurance hypothesis.

Question

Quizplus · Accepted Answer

The statement quoted in the article refers to the information hypothesis, which states that the perceived quality of financial information will lead to its increased use and reliance by users. The expectations gap refers to the difference between what the public perceives the role of auditors to be and what they actually do. Agency theory involves the relationship between principals (shareholders) and agents (management) and their conflicting interests. The insurance hypothesis suggests that the purpose of an audit is to provide insurance against financial misstatements.

While Awaiting a Meeting in His Firm's Boardroom, the Senior