Which statement is true regarding audits for large public companies under company law?

Which statement is true regarding audits for large public companies under company law?

• A. Accounts do not require audit.
• B. Accounts must be audited.
• C. Audit is optional for all public companies.
• D. Only the tax office conducts audits.

Answer: (B)

Audits are mandatory for large public companies to ensure the financial statements give a true and fair view of the company’s position and performance. By law, an independent external auditor must examine the accounts and provide an audit opinion, which is then included with the annual financial statements. This setup protects shareholders and other stakeholders by assuring reliability and accountability in reporting. So, the statement that accounts must be audited reflects this legal requirement. The other ideas—that audits aren’t required, that audits are optional for public companies, or that only the tax office conducts audits—don't fit because public company law requires the external audit of financial statements, and tax audits, while important for tax compliance, do not replace the statutory financial statement audit.

Audits are mandatory for large public companies to ensure the financial statements give a true and fair view of the company’s position and performance. By law, an independent external auditor must examine the accounts and provide an audit opinion, which is then included with the annual financial statements. This setup protects shareholders and other stakeholders by assuring reliability and accountability in reporting. So, the statement that accounts must be audited reflects this legal requirement. The other ideas—that audits aren’t required, that audits are optional for public companies, or that only the tax office conducts audits—don't fit because public company law requires the external audit of financial statements, and tax audits, while important for tax compliance, do not replace the statutory financial statement audit.