The Principle of Full Disclosure

A

The principle of full disclosure is a fundamental accounting principle that requires companies to provide complete, accurate, and transparent financial information in their financial statements, including all material information that may impact the users' understanding of the financial position of the company. This principle is aimed at providing investors, creditors, and other stakeholders with all the necessary information to make informed decisions regarding their investment or credit decisions.

Option A is the correct answer. Full disclosure requires that any material deviation from Generally Accepted Accounting Principles (GAAP) must be explained to the reader of the financial information. This means that companies must provide a clear and accurate explanation of any accounting treatment that deviates from the standard GAAP rules, including any special circumstances or events that may have affected the company's financial performance during the period in question.

Option B is incorrect because it refers to SAS (Statement on Auditing Standards), which is a set of auditing standards established by the American Institute of Certified Public Accountants (AICPA). SAS provides guidelines for auditors on how to conduct audits and issue audit reports, but it is not directly related to the principle of full disclosure.

Option C is also incorrect because it implies that the writer of the financial information is the one who needs to be informed about any material deviation from GAAP. However, the principle of full disclosure is primarily concerned with providing accurate and complete information to the users of the financial statements, such as investors, creditors, and other stakeholders, rather than the writer of the financial information.

In summary, the principle of full disclosure requires companies to disclose any material deviation from GAAP to the readers of the financial information to ensure that they have all the necessary information to make informed decisions.