If There Is a Material Misstatement in the Financial Statements

question 46

Multiple Choice

If there is a material misstatement in the financial statements that is related to a specific account in the financial statements,the auditor should

• A)in the basis for qualified opinion modification paragraph,the auditor should include a description and quantification of the financial effects of the misstatement,if at all possible.If it is not possible to quantify the misstatements,the auditor should state this is the basis for adverse opinion modification paragraph.
• B)in the basis for modification paragraph,the auditor should include a description and quantification of the financial effects of the misstatement,if at all possible.If it is not possible to quantify the misstatements,the auditor should state this is the basis for modification paragraph.
• C)in the basis for adverse opinion modification paragraph,the auditor should include a description and quantification of the financial effects of the misstatement,if at all possible.If it is not possible to quantify the misstatements,the auditor should state this is the basis for disclaimer of opinion modification paragraph.
• D)include in the basis for modification paragraph,a description explaining how the disclosure is misstated.

---

Definitions:

Noncallable Bonds

Bonds that cannot be redeemed by the issuer before their specified maturity date, offering protection to bond investors.

Par Value

The face value of a bond or stock, as stated by the issuing company, which may differ from the market value.

Annual Coupon

The yearly interest amount paid to bondholders, typically expressed as a percentage of the bond's face value.

Default Risk Premium

The additional yield a lender demands to compensate for the risk that the borrower may default on the loan.