Unit 3 analyzing financial statements quiz
While financial statements are based on generally accepted accounting principles (GAAP) and are audited by a CPA firm, investors still need to be aware of potential risks when assessing their validity. This is because there can be instances where the assumptions made in calculating certain figures may not accurately reflect reality or irregularities could exist due to intentional misstatement or fraud. Additionally, even if the audit results come back clear, it is important for investors to understand that there may be other factors at play which can affect a company’s performance such as macroeconomic conditions or industry trends which should all be taken into consideration when making decisions.
Overall while financial statements provide valuable insight into a business’s performance and condition, it is up to investors to do further research and ask questions in order ensure their understanding of these documents is accurate before investing their hard-earned money.