Which of the Following Relatively Small Misstatements Most Likely Would

question 27

Multiple Choice

Which of the following relatively small misstatements most likely would have a material effect on an entity's financial statements?

• A)An illegal payment to a foreign official that was not recorded.
• B)A piece of obsolete office equipment that was not retired.
• C)A petty cash fund disbursement that was not properly authorized.
• D)An uncollectible account receivable that was not written off.

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Definitions:

Induced Consumption

The portion of consumption that changes as a result of changes in income, with higher incomes leading to increased consumption.

Autonomous Consumption

The amount of consumption that occurs regardless of current income levels, reflecting basic spending needed to survive.

Saving

The portion of income not spent on consumption but kept aside for future use, which may be invested to generate wealth.

Disposable Income

The amount households can devote to saving and spending once income taxes have been factored in.