Which of the following is not true about generally accepted accounting principle

Question

Which of the following is not true about generally accepted accounting principles (GAAP)?

GAAP provide guidelines as to how to account for specific events impacting the financial performance of a firm

The application GAAP accounting rules help ensure consistency so analysts can compare one firm’s financial performance to another

It is customary for Definitive Purchase Agreements to require that a target company represent that its financial books are kept in accordance with GAAP

GAAP always guarantees that a firm’s financial books are accurate

Differences between how a firm records actual financial transactions and how they should be recorded based on GAAP could indicate fraud or mismanagement.

Explanation / Answer

The statement "GAAP always guarantees that a firm’s financial books are accurate" is NOT true

This is because following the guidelines provided under GAAP ensures that a firm's books are reliable and comparable with another firm's financial statements , but conformance with GAAP cannot guarantee that a firm's financial books are always accurate, since accountants are quite skilful when it comes to manipulation of financial data/ numbers even while conforming to the guidelines prescribed under GAAP

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.