The Audit of the Financial Reports of Matilda Ltd Had

question 56

Multiple Choice

The audit of the financial reports of Matilda Ltd had been completed except for the outcome of a material contingent liability that is still subject to the outcome of a court decision.The case is still ongoing but it is expected that a decision will be made after three months.The deadline for submitting the financial reports is next month.Which action is consistent with the notion of 'timeliness' in the preparation of financial reports?

• A) Matilda Ltd should wait for the court decision to be completed before releasing the financial reports as the amount of the liability is material.
• B) Matilda Ltd should release the financial report on or before the deadline but exclude the contingent liability from the report as the outcome is still uncertain.
• C) Matilda Ltd should release the financial report on or before the deadline but disclose the contingent liability in the notes to the accounts.
• D) Matilda Ltd must wait for the court decision to be completed before releasing the financial reports as it is expected to occur in the near future anyway (i.e. three months).

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Definitions:

Independent Variable

The variable in an experiment that is manipulated or changed by the researcher to investigate its effect on the dependent variable.

Dependent Variable

In an experimental study, the variable that is being tested and measured, often considered the effect in a cause-effect relationship.

Control Variable

A control variable is an element that is kept constant throughout an experiment to ensure that the effect on the outcome can be attributed to the variable being tested.

Hypothetical Variable

A variable that is not directly observable, proposed to explain relationships and effects in scientific models.