Accounting Online Program Certification Practice Test

According to IAS 1, financial statements must provide what specific assurance?

1. They must reflect the company's strategies

2. They must give a true and fair view

3. They must include all management discussions

4. They must be issued quarterly

The correct answer is: They must give a true and fair view

Financial statements are designed to provide stakeholders, including investors, creditors, and regulators, with a clear and accurate depiction of a company's financial position and performance. Under International Accounting Standards (IAS) 1, one of the fundamental requirements is that financial statements must give a true and fair view of the company's financial state. This focus on a true and fair view is essential because it ensures that the financial information presented is not misleading. It allows users to make informed decisions based on the financial data. The "true and fair view" concept encompasses several principles, including adherence to accounting standards, neutrality, completeness, and transparency, which collectively enhance the reliability of financial information. While the other options present various aspects related to a company's financial reporting, they do not capture the overarching requirement mandated by IAS 1. For instance, company strategies may influence financial reporting but are not a core requirement for the financial statements themselves. Including all management discussions, while potentially beneficial for context, is not mandated by IAS 1. Lastly, while some companies may choose to issue financial statements quarterly, this is not a requirement under IAS 1, which emphasizes annual reporting as a standard practice. Thus, the emphasis on providing a true and fair view is fundamental for ensuring the integrity and reliability