Which statement best describes the role of a credit agency in accounting?

• A. A credit agency prepares financial statements for public companies.
• B. A credit agency manages the payroll and tax filings for businesses.
• C. A credit agency evaluates the creditworthiness of individuals and organizations.
• D. A credit agency audits the financial records of corporations.

Answer: (C)

Verified step by step guidance

1. Understand the role of a credit agency: A credit agency is an organization that evaluates the creditworthiness of individuals and organizations. This means they assess the ability of a borrower to repay debt based on their financial history and other factors.
2. Eliminate incorrect options: Review each option provided in the question and determine if it aligns with the role of a credit agency.
3. Option 1: 'A credit agency prepares financial statements for public companies' - This is incorrect because preparing financial statements is typically the responsibility of the company's accounting department or external auditors.
4. Option 2: 'A credit agency manages the payroll and tax filings for businesses' - This is incorrect because payroll and tax filings are usually handled by the company's internal accounting team or outsourced to payroll service providers.
5. Option 4: 'A credit agency audits the financial records of corporations' - This is incorrect because auditing is performed by external or internal auditors, not credit agencies. Therefore, the correct answer is: 'A credit agency evaluates the creditworthiness of individuals and organizations.'