The purpose of the Management Report is to:
I. analyze favorable and unfavorable trends affecting the firm.
II. reinforce senior management's responsibilities for the company's financial and internal control systems.
III. review the firm's financial condition in light of short-term liquidity requirements and proposed investment activities.
IV. emphasize the roles of management, directors and auditors in the preparation of financial statements.
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A. B. C. D.D
I & III are part of Management's Discussion & Analysis (MD&A)
The purpose of the Management Report is to provide information and analysis to senior management, directors, and auditors regarding the firm's financial condition and its related control systems. Let's break down each statement and see if it aligns with the purpose of the Management Report:
I. Analyze favorable and unfavorable trends affecting the firm. This statement suggests that the Management Report aims to analyze and evaluate the trends that impact the firm, whether they are positive or negative. Analyzing these trends can help senior management make informed decisions and take appropriate actions. Therefore, statement I aligns with the purpose of the Management Report.
II. Reinforce senior management's responsibilities for the company's financial and internal control systems. This statement emphasizes the role of the Management Report in reinforcing senior management's responsibilities regarding the financial and internal control systems of the company. The report provides information and analysis that enables senior management to understand and fulfill their obligations in maintaining effective financial and internal controls. Therefore, statement II aligns with the purpose of the Management Report.
III. Review the firm's financial condition in light of short-term liquidity requirements and proposed investment activities. This statement suggests that the Management Report is intended to review the financial condition of the firm, considering factors such as short-term liquidity requirements and proposed investment activities. By reviewing these aspects, senior management can assess the firm's ability to meet its short-term obligations and evaluate potential investment opportunities. Therefore, statement III aligns with the purpose of the Management Report.
IV. Emphasize the roles of management, directors, and auditors in the preparation of financial statements. This statement highlights the purpose of the Management Report in emphasizing the roles of management, directors, and auditors in the preparation of financial statements. The report serves as a tool to communicate the responsibilities and contributions of these parties in ensuring the accuracy and reliability of the financial statements. Therefore, statement IV aligns with the purpose of the Management Report.
To summarize, statements I, II, III, and IV all align with the purpose of the Management Report. Therefore, the correct answer is option C: II, III & IV.