If the Auditors Discover That the Carrying Amount of a Client's

question 97

Multiple Choice

If the auditors discover that the carrying amount of a client's investments is overstated because of a loss in value that is other than a temporary decline in market value, they should insist that:

• A)the approximate market value of the investments be shown in parentheses on the face of the balance sheet.
• B)the investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes.
• C)the loss in value be recognized in the financial statements.
• D)the equity section of the balance sheet separately show a charge equal to the amount of the loss.

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Definitions:

Customer Demand

The quantity of products or services that consumers are willing and able to purchase at various prices during a specific period.

Computer Clock

A mechanism within a computer that keeps track of time and coordinates the execution of tasks.

Wasted Capacity

Refers to the portion of the potential production output or service capability that remains unused or not effectively utilized.

Excessive Cancellations

A situation where the number of orders or reservations canceled is significantly higher than usual, potentially indicating operational or demand planning issues.