It has been stated that auditing must be neutral because audited financial statements must serve the needs of a wide variety of users. If the auditor were to favor one group, such as existing shareholders, there might be a bias against another group, such as prospective investors.

Required

a. What steps has the public accounting profession taken to minimize potential bias toward important users and thereby encourage neutrality in financial reporting and auditing?

b. Who are the primary users of audited financial statements? Identify four user groups you believe are the most important. For each one identified,

(1) Briefly indicate their primary use of the financial statements and

(2) Indicate how an accounting treatment might benefit one party and potentially act to the detriment of another user.