Which of the following statements is true regarding financial statements?

Financial statements must adhere to Generally Accepted Accounting Principles (GAAP) to ensure consistency, reliability, and comparability in the reporting of financial information. GAAP provides a framework that governs how financial transactions and events should be recorded and presented, allowing stakeholders, such as investors and regulators, to make informed decisions based on accurate and standardized data.

The requirement for financial statements to conform to GAAP is crucial for maintaining transparency in financial reporting. This consistency across different entities helps users of the financial statements, whether they are individual investors, analysts, or regulatory bodies, to understand and compare financial performance and position effectively.

In contrast, the other statements do not accurately reflect the nature of financial statements. They do not express personal opinions; they apply to both public and private entities; and they include cash flows, particularly in the cash flow statement, which is a key component of financial reporting.