A Client's Previous Two Years of Financial Statements Understated Estimated

question 39

Multiple Choice

A client's previous two years of financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, both immaterial amounts. This year, the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit, $100,000 represents a material amount. Assuming that the entire understatement is to be recorded based on SEC SAB 108, the decrease in this year's income due to these understatements is:

• A) $0.
• B) $60,000.
• C) $110,000.
• D) $140,000.

Learn approaches to address problem behaviors within a group.

Recognize key patterns and factors that contribute to team success.

Understand the role of a leader in facilitating team objectives through task assignment.

Comprehend techniques for enhancing teamwork and group decision-making quality.

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Definitions:

Fiduciary Duty

A legal obligation requiring one party (the fiduciary) to act solely in another party's (the beneficiary's) interest when managing the latter's assets, involving loyalty and care.

Shareholder's Legal Duties

Obligations imposed on shareholders, including acting in the best interest of the corporation and adhering to corporate laws and regulations.

Majority Shareholders

Individuals or entities that own more than half of the total shares of a corporation, giving them significant control over company decisions.

Proxies

Authorizations given by shareholders for others to vote on their behalf at company meetings.