“Why Should Decision Makers Trust Financial Statements?”, an important distinction was made. The
report of the independent auditor never assures decision makers that financial statements are “presented fairly.”
That is a hopelessly abstract concept like truth and beauty. Instead, the auditor states that the statements are
“presented fairly…in conformity with accounting principles generally accepted in the United States of America.”
That is a substantially more objective standard. Thus, for this men’s clothing store, all the following figures are
presented fairly but only in conformity with the cost flow assumption used by the reporting company.
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