Financial Accounting and Reporting-CPA Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The concept of relevance and reliability in the context of the FASB Conceptual Framework is well captured by the choice pertaining to consistency enhancing the reliability of financial information.

Relevance refers to the capacity of financial information to influence users' decisions, while reliability relates to the degree to which information is dependable and accurate. Consistency is key in achieving reliability because when the same accounting principles are applied over time, it allows for users to make comparisons and derive meaning from the financial statements.

When consistency is maintained, stakeholders can trust that the financial information has not been arbitrarily manipulated from one period to another, which reinforces their confidence in the reliability of the reports. This consistency in application reinforces the notion that the financial data is not only relevant for making informed decisions but is also reliable enough to be trusted.

Verifiability and comparability also play important roles but often relate more to the integration and assessment of data rather than a direct relationship to relevance and reliability in the manner that consistency does. Therefore, linking consistency with an enhancement of reliability effectively encapsulates the connection between relevance and reliability as per the FASB Conceptual Framework.