Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company's share price?
A) Full disclosure.
B) Going concern.
C) Historical cost.
D) Expense recognition.

Question

Quizplus · Accepted Answer

This violates the accounting principle of full disclosure, which requires companies to disclose all material facts that could impact investors' decisions. By not disclosing the major litigation, the company is not providing complete and accurate information to investors, which could result in an incorrect evaluation of the company and its financial health.

Which Accounting Assumption or Principle Is Being Violated If a Company