What Is the Main Reason That It Is Necessary for Public

question 2

Multiple Choice

What is the main reason that it is necessary for public companies to follow the rules and format set out in the Generally Accepted Accounting Principles (GAAP) when creating financial statements?

• A)It is easier to find specific information in such a report if it is laid out in a clear and consistent manner.
• B)It ensures that information on the performance of private companies is readily available to the public.
• C)It ensures that important information is not omitted and superfluous information is not included.
• D)It makes it easier to compare the financial results of different firms.

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Definitions:

Moral-Hazard

Moral hazard is a situation in which one party is more likely to take risks because the negative consequences of the risk will be felt by another party.

Monitoring Employees

The process of overseeing employees' work activities and performance, often through the use of technology or other means.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another.

Prevalent

Widespread in a particular area at a particular time; commonly occurring or accepted.