![]() Since investors and creditors rely on auditor’s reports, the reports should be independent. This helps ensure that the financial reporting and audits are done objectively. Although auditors must adhere to GAAS, auditors must be independent of the company they are auditing. The objectivity principle extends to internal auditors and CPA firms as well. By making financial statements more relevant and reliable, the objectivity principle makes the financial information more usable for investors and creditors. The two concepts of relevance and reliability encompass the objectivity principle. In other words, the favorable and unfavorable financial information is presented in the financial statements. The concept of reliability implies that financial information can be verified by many sources with evidence and that all financial information is presented. This means the financial statements are accurate and can be used to predict future company performance. The concept of relevance implies that financial statements can have predictive value and feedback value. The objectivity principle is aimed at making financial statements more relevant and reliable. This means that accounting information must be based on research and facts, not merely a preparer’s opinion. If a change in accounting principle has no material effect in the period of change but is reasonably certain to have a material effect in later periods, the disclosures required by (a) shall be provided whenever the financial statements of the period of change are presented.The objectivity principle states that accounting information and financial reporting should be independent and supported with unbiased evidence.
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