When Comparing Misstatements with a Measurement Base, the Auditor Must

question 122

Multiple Choice

When comparing misstatements with a measurement base, the auditor must consider the pervasiveness of the misstatement. Of the following examples, the most pervasive misstatement is a(n)

• A) understatement of inventory.
• B) understatement of retained earnings caused by a miscalculation of dividends payable.
• C) misclassification of notes payable as a long-term liability when it should be current.
• D) misclassification of salary expense as a selling expense.

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Definitions:

Financial Resources

The available resources in the form of cash, liquid securities, and credit lines that a business can use for expenditure.

Kano Model

A theory for product development and customer satisfaction, which categorizes customer preferences into must-be, performance, and delighter attributes.

Customer Needs

The requirements and desires of consumers that they seek to fulfill when purchasing goods or services.

New Products

Items introduced to the market for the first time, offering innovation or improvements compared to existing offerings.