Describe the users of audited financial statements and the decisions that they need to make based on reliable information. Please use the illustration below to help you answer this question. Exhibit 1.1Users of Audited Financial StatementsUserTypes of DecisionsManagementReview performance, make operational decisions, and report results to capitalmarketsBuy or sell stockBuy or sell bondsEvaluate loan decisions, considering interest rates, terms, and riskStockholdersBondholdersFinancial institutionsTaxing authoritiesRegulatory agenciesDetermine taxable income and tax dueDevelop regulations and monitor complianceMake collective bargaining decisionsAssess the financial position of a company in litigationLabor unionsCourt systemVendorsAssess credit riskRetired employeesProtect employees from surprises concerning pensions and otherpost-retirement benefits

Answered: Describe the users of audited financial…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Describe the users of audited financial statements and the decisions that they need to make based on reliable information. Please use the illustration below to help you answer this question.

Exhibit 1.1
Users of Audited Financial Statements
User
Types of Decisions
Management
Review performance, make operational decisions, and report results to capital
markets
Buy or sell stock
Buy or sell bonds
Evaluate loan decisions, considering interest rates, terms, and risk
Stockholders
Bondholders
Financial institutions
Taxing authorities
Regulatory agencies
Determine taxable income and tax due
Develop regulations and monitor compliance
Make collective bargaining decisions
Assess the financial position of a company in litigation
Labor unions
Court system
Vendors
Assess credit risk
Retired employees
Protect employees from surprises concerning pensions and other
post-retirement benefits

Expert Solution

Step 1 Introdution

Users of Financial statements: When referring to users of financial statements, we're talking about people who are interested in learning about a company's Owners/investors. They're in charge of the whole Lenders, Creditors/suppliers. All these rely on the audited financial statements.

Users of the financial statement include:

Shareholders or investors or Bondholders.
Competitors.
Investment analysts.
Employees.
Governments.
Company management.
Lenders or Creditors
Customers.

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