The Dollar Amount of Some Misstatements Cannot Be Accurately Measured

question 67

Multiple Choice

The dollar amount of some misstatements cannot be accurately measured. If, for example, the client was unwilling to disclose an existing lawsuit, the materiality question the auditor must evaluate in such a situation is

• A) what effect will it have on net income.
• B) how will it affect management's future decisions.
• C) whether it may increase the auditor's exposure to lawsuits.
• D) what effect it will have on statement users.

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Definitions:

Recognizing Revenue

The process of recording revenue in the accounting records once it is earned and realizable, in accordance with relevant accounting standards.

Performance Obligation

A commitment in a contract to transfer a good or service to a customer, for which a company must satisfy to recognize revenue.

IFRS

International Financial Reporting Standards, which are a set of accounting standards developed by the International Accounting Standards Board (IASB) used globally to prepare public company financial statements.