Which one of the following statements does not address the limitations of financial statements, that may lead to unethical financial reporting practices?

A. The value shown for assets carried in the statement of financial position at historical cost may bear no relation whatever to what their current value is and what it may cost to replace them.

B. The depreciation charge may be low due to historical cost method, leading to the overstatement of profits in real terms. The financial statements do not show the real cost of using such assets.

C. Overstatement of profit due to the low depreciation charge could have led to too much profit having been distributed.

D. The low depreciation charge may increase the likelihood of new asset purchases, which would increase the total assets to attract investors’ investing interests

 

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