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

question 17

Multiple Choice

A client's previous two years 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, $55,000 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.

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Definitions:

Problem Solver

An individual or entity capable of analyzing issues, identifying solutions, and implementing strategies to address challenges effectively.

Supply Chain

is a system encompassing the production, handling, and distribution of goods and services from the source of production to the consumer.

Late Delivery

The occurrence of a product or service not being delivered or completed by the expected time frame agreed upon with a customer or client.

Problem Solvers

Individuals or groups skilled in identifying, analyzing, and finding solutions for complex issues or challenges.