Question

Which of the following is not a purpose of the objectivity principle?

• A. To make financial statements more useful to investors and end users
• B. To make the financial information consistent and trustworthy to investors and end users
• C. To ensure that the financial information can be proven with evidence and the findings can be duplicated
• D. To ensure that the organization does not close down its operations in the near future

Answer 1

The correct option is D

To ensure that the organization does not close down its operations in the near future

The purpose of the objectivity principle along with all of GAAP is to make financial statements more useful to investors and end users. The objectivity principle, specifically aids to ensure that financial statements are reliable and verifiable. Reliability means that the financial information is consistent and trustworthy to investors and end users. Verifiability means that the financial information can be proven with evidence and the findings can be duplicated. Both reliability and verifiability give usefulness to the financial statements.