What is the main reason why the shareholders of a large company need an independent audit of its financial statements?

Correct answer: B) Ownership is separated from management, so shareholders need independent assurance on information prepared by the directors who run the business

Explanation

In most large companies the shareholders do not manage the business, so the directors act as their agents and prepare financial statements reporting on their own stewardship. Because directors may have incentives to present results favourably, an independent audit adds credibility to the information. Directors, not shareholders, prepare the statements, and an audit gives no guarantee about dividends.