For an entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, the principles selected should:

Question

Quizplus · Accepted Answer

Choice "C" is correct. Financial statements are presented fairly in conformity with GAAP when there are no material misstatements included therein. The fact that there may occasionally be immaterial misstatements means that the financial statements are correct "within a range of acceptable limits." Choice "A" is incorrect. Accounting principles may change from year to year. As long as such changes are properly accounted for, the financial statements are still in conformity with GAAP. Choice "B" is incorrect. The AICPA and the FASB determine GAAP, not the Auditing Standards Board. Choice "D" is incorrect. There is no requirement that an entity's financial statements be prepared in accordance with prevalent industry practices in order to be in conformity with GAAP

For an Entity's Financial Statements to Be Presented Fairly in Conformity