Question 3:

Comment on the following statements:

1. The balance sheet is pretty useless for decision making. It only shows the position at a single point in time and a past point in time, at that.

2. A companys income statement shows an annual sales revenue of about AED 60 million and interest payable of AED 6.5 million. The auditors discovered that an employee had fraudulently paid himself AED 2,000 and charged this to interest payable in the income statement.

Would the auditors be reasonable to conclude that the income statement fails to show a fair representation of what happened during the year concerned?