You Are Assigned to Audit Accounts Payable for a Manufacturing

question 5

Multiple Choice

You are assigned to audit accounts payable for a manufacturing client. As part of the planning, your manager sets a tolerable misstatement amount of+/- $125,000. Your review of unpaid invoices indicates an understatement error of $25,253 from a sample of $675,467. The population value of A/P is $5,241,687 at October 31st. The amount of any additional adjustment required by the auditor (rounded) is:

• A) $0.
• B) $131,998.
• C) $6,998.
• D) $125,000.

---

Definitions:

Agency Costs

The expenses related to conflict of interests between stakeholders, such as owners and managers, in a corporation, often involved in monitoring and aligning interests.

Advertising

The activity or profession of producing advertisements for commercial products or services.

Time Clocks

Devices used to record the beginning and end of workers' working hours.

Agency Costs

The expenses related to resolving conflicts of interests between stakeholders and management in a corporation.