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ACCA Applied Knowledge · Business and Technology · Financial information provided by business

Which of the following statements about legal obligations is correct?

Companies are generally legally required to prepare financial statements for external users, but there is no general legal requirement to prepare management accounts. Management accounts are produced voluntarily, in whatever format and frequency managers find useful, and are not audited or publicly filed.

  1. AManagement accounts must be filed publicly each year in the same format as financial statements
  2. BNeither financial nor management accounts are ever subject to any legal requirement
  3. CManagement accounts must be audited by an external auditor in every company
  4. DCompanies are generally required by law to prepare financial statements, but there is no general legal requirement to prepare management accountsCorrect

Explanation

Law and accounting standards require companies to prepare financial statements for external users. Management accounts are prepared at the discretion of management to meet their needs, with no mandated format, audit or public filing.

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