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Which of the following are advantages of having legislation which governs the preparation of financial statements?
A Guaranteed minimum levels of disclosure of financial matters
B Companies behave in a more ethical manner
C Accounts prepared in different countries are more comparable
D Accounts comply with accounting standards
Answer is A. Can you please explain Professor why it is correct? I think I have not understood the question.
Legislation = laws. Laws should be complied with or punishment will follow.
A Yes. Laws about financial reporting usually specify minimum levels of detail. Eg directors’ remuneration.
B No. Companies could comply with financial reporting disclosures but this will not prevent unethical behaviour such as health and safety breaches.
C No. Different countries have different laws.
D No. Accounting standards are much more detailed than laws about financial reporting.
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