Most Audit Firms Use a Schedule to Accumulate the Known

question 94

Multiple Choice

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements. Which of the following statements regarding this process is false?

• A) Adjustments made to correct the financial statements are referred to as booked.
• B) Possible adjustments to the financial statements that are left uncorrected are referred to as waived.
• C) Tax effects are not shown on schedules of correcting errors.
• D) The nature of the misstatement, as well as the quantitative amount, is considered in the judgment of materiality.

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Definitions:

Inventory Turnover

A measure of how many times a company's inventory is sold and replaced over a certain period, indicating the efficiency of inventory management.

LIFO

In the Last In, First Out method, the newest items in the inventory are the first to be sold.

Inventory Turnover

A financial ratio that measures the number of times a company sells and replaces its stock of goods during a given period, indicating efficiency in inventory management.

LIFO Reserve

The difference between the cost of inventory calculated under the Last-In, First-Out (LIFO) method and its cost calculated under the First-In, First-Out (FIFO) method.