Chapter 1 Tiffany Watt Assignment: A1 September 2, 2011 AC 405 – E01 1-23. How do the capital markets and economy benefit as a result of all publicly-traded companies having an independent audit? The SEC suggests that one of the important motivators for requiring public companies to be audited is the need for orderly, functioning capital markets. If the investing public perceives audited financial statements to be more reliable than non-audited financial statements, then audits make a significant contribution by increasing investor confidence. Investors who have confidence in the information are more likely to participate in the capital markets either through personal investing or savings and retirement programs. This participation in the capital markets is an important driver of successful U.S. and global economies. 1-26. Why does having audited financial statements bring down a company’s cost of capital? Having audited financial statements bring down a company’s cost of capital because an integrated
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