Why does having audited financial statements bring down a company’s cost of capital? SLUTION Audited financial statements provide reasonable confidence to investors that the financial statements are materially correct, reliable, fair, and transparent. Thus increased confidence of investors results in lower interest rates and returns required by them and increased ability of company to raise more funds. Having audited financial statements also reduces the risk of fraud and help the organization to govern and operate effectively and efficiently. All these factors cause a real decrease in a company's cost of capital and the pool of informed investors willing to invest is increased when audited financial statements are available.
Relevant QuestionsOver the course of Young & Young’s audit of SQL Group, a publicly traded company, Young & Young concluded that SQL’s financial statements presented fairly according to U.S. GAAP, but its internal controls over financial ...Who is responsible for the report on internal control over financial reporting? Who is responsible for the financial statements? The audit report? How might these documents change as a result of the audit?In a CPA firm, the work of each person is reviewed by his or her supervisor. What is the purpose of having the work of each person reviewed by a professional with more experience?What is the client acceptance and continuance process?What procedure does the auditor use to assess the risk of fraud early in the audit?
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