Multiple Choice
Generally Accepted Accounting Principles (GAAP) are designed to provide guidance for which of the following?
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15. GAAP vs IFRS
GAAP vs. IFRS: Introduction
Struggling with Financial Accounting?
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Who is ultimately responsible for properly applying GAAP in a company?
A
External auditors
B
Management
C
Shareholders
D
Board of Directors
Verified step by step guidance1
Understand the role of GAAP (Generally Accepted Accounting Principles): GAAP is a set of accounting standards and principles that companies must follow to ensure consistency, transparency, and accuracy in financial reporting.
Identify the key stakeholders in a company: External auditors, management, shareholders, and the board of directors all play different roles in the financial reporting process.
Clarify the responsibility of external auditors: External auditors review financial statements to ensure compliance with GAAP, but they do not prepare or apply GAAP themselves.
Examine the role of management: Management is responsible for preparing financial statements and ensuring that GAAP is properly applied in the company's accounting practices.
Understand the roles of shareholders and the board of directors: Shareholders invest in the company, and the board of directors oversees management, but neither is directly responsible for applying GAAP.
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