Which one of the following is not an external user of financial information?

Question

BlackTom AI · Accepted Answer

Question restated: Which one of the following is not an external user of financial information?

Option A: Stockholders. External users include owners who analyze financial statements to assess performance, return on investment, and ownership stakes. Stockholders are indeed external to the company.

Option B: Internal Revenue Service. The IRS is an external party that reviews a company's financials for tax compliance and reporting purposes.

Option C: Creditors. Creditors rely on financial statements to evaluate creditworthiness and the ability to meet obligations; they are external to the entity.

Option D: Senior company management. This group comprises individuals within the company who prepare and use the financial information for planning, controlling operations, and decision-making. They are internal users rather than external.

In terms of classification, the external users encompass investors, tax authorities, lenders, suppliers, customers, regulators, and other parties outside the organization who rely on the financial statements. Internal users, such as senior management, internal departments, and employees, use the information for internal decision-making and governance.

Key distinctions: External users typically do not have access to confidential internal reports and rely on published or externally provided financial statements. Internal users, by contrast, have direct access to internal records and use the data to run and manage the organization. Misconceptions to avoid: thinking that internal stakeholders like management are external would conflate governance and reporting purposes. Also, assuming tax authorities or creditors are internal would contradict the customary separation of internal and external audiences for financial reporting.

Which one of the following is not an external user of financial information?

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