Insurance hypothesis tells us that:

a)investors can insure themselves against loss by investing in a diverse investment portfolio should an individual investment fail.

b)investors will demand that financial reports be audited as a way of insuring against some of their loss should their investment fail.

c)the entity can take out insurance to protect itself from such risks as employee or management fraud which can lead to material misstatements in the financial statements.

d)investors cannot insure themselves against loss when investing in an entity.