Which financial document must reflect the true and fair view of a company's financial state?

The Statement of Financial Position, often referred to as the balance sheet, is pivotal in displaying a company's financial state at a specific point in time. It provides a comprehensive overview of what the company owns (assets), what it owes (liabilities), and the equity held by the owners.

The requirement for this statement to reflect a true and fair view is entrenched in accounting principles, specifically the need for transparency and accuracy in financial reporting. The balance sheet not only summarizes the company's financial position but also serves as a tool for stakeholders, including investors, creditors, and management, to assess the company's stability and operational efficiency.

In contrast, the Income Statement summarizes revenues and expenses over a specific period, thus focusing on performance rather than the financial position. The Cash Flow Statement illustrates cash inflows and outflows but does not provide a complete picture of the company's assets and liabilities. The Audit Report, while crucial for evaluating and assuring the integrity of financial statements, does not itself represent the financial state of the company but rather assesses the accuracy of financial documents like the Income Statement and the Statement of Financial Position. Thus, the core purpose of the Statement of Financial Position in representing a company's financial state justifies why it must reflect a true and fair view.