2019HSCShort answer

Q22 (a)

2 marks

Question

Outline ONE ethical issue related to the preparation of financial reports.

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Solution

Criteria	Marks
Sketches in general terms ONE ethical issue related to the preparation of financial reports	2
Recognises ONE ethical issue related to the preparation of financial reports	1

Sample answer:

An ethical issue related to the preparation of financial reports may be that businesses overestimate their revenue and understate their expenditure to give a false impression of their profitability. This false impression gives an inaccurate picture and may encourage investors to invest in a business which appears to be in a stronger financial position than it actually is.

Supplied marking guidance · human reviewed

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Syllabus alignment

Finance

Limitations and ethics of financial reportingEvaluate limitations involving normalised earnings, capitalised expenses, asset valuation, timing, debt repayments and notes, and examine ethical reporting issues.

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