Deck 16: Auditing Operations and Completing the Audit

Question 1

Auditors should perform audit procedures relating to subsequent events?

A)Through year-end.
B)Through issuance of the audit report.
C)Through the date of the audit report.
D)For a reasonable period after year-end.

Answer 1

C

Question 2

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

A)Miscellaneous revenue.
B)Professional fees.
C)Supplies expense.
D)Repairs and maintenance.

Answer 2

C

Question 3

If management fails to list an unasserted claim in the letter of inquiry to a lawyer,the lawyer is not required to inform the auditors of the omission.

Answer 3

True

Question 4

If not adjusted,a situation in which the total of uncorrected misstatements in the financial statements exceeds a material amount is likely to lead to an audit report modification.

Question 5

In auditing the balance sheet,most revenue and expense accounts are also audited.Which accounts are most likely to be audited when auditing Accounts Receivable?

A)Sales and Cost of Goods Sold.
B)Interest and Bad Debt Expense.
C)Sales and Bad Debt Expense.
D)Interest and Cost of Goods Sold.

Question 6

An example of an internal control weakness is to assign the payroll department the responsibility for:

A)Preparing the payroll expense distribution.
B)Preparing the payroll checks.
C)Authorizing increases in pay.
D)Preparing journal entries for payroll expense.

Question 7

Future purchase commitments should be disclosed in the notes to the financial statements.

Question 8

Analytical procedures are required as a part of the:

A)Detailed tests of balances.
B)Internal control assessment.
C)Procedures performed near the end of the audit.
D)Substantive testing.

Question 9

The audit of which of the following balance sheet accounts does not normally result in verification of an income statement account?

A)Cash.
B)Accounts receivable.
C)Property,plant,and equipment.
D)Intangible assets.

Question 10

Analytical procedures are often used for verification of income statement accounts.

Question 11

Internal control over payroll is enhanced when the personnel department distributes payroll checks.

Question 12

Shortly after year-end,Allen Corporation was informed of the bankruptcy of Quest.Allen Corporation showed a receivable of $20,000 (a material amount)due from Quest as of year-end-none of which seems recoverable.The receivable had been questionable for some time as Quest had been experiencing financial difficulties for the past several years.Yet,Quest's bankruptcy did not occur until after Allen Corporation's year-end.Under these circumstances:  

$\quad$ $\quad$ $\quad$ $\quad$$\begin{array}{lll}\text { The financial } & \text { The event requires financial } & \text { The auditor's report should be }\\\text { statements should be } & \text { statement disclosure, but no } & \text { modified for a lack of }\\ \text {adiusted } & \text { adjustment } & \text { consistency}\\\end{array}$
A- $\begin{array}{lll}\text { Yes } &\quad\quad\quad\quad\quad\quad\quad\quad\quad \quad \text { No } & \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { No } \\\end{array}$
B- $\begin{array}{lll}\text { Yes } &\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { No } & \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Yes } \\\end{array}$
C- $\begin{array}{lll}\text { No } &\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { Yes } &\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { Yes } \\\end{array}$
D- $\begin{array}{lll}\text { No } &\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { Yes } & \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { No }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 13

When auditing the statement of cash flows of a profitable,growing company which combination is most likely?
$\begin{array}{cc}\text {Cash flows from operations }&\text{Cash flows from investing}\end{array}$
A- $\begin{array}{cc}\quad\quad\quad\text { Positive } &\quad\quad\quad\quad\quad\quad \text { Positive } \\\end{array}$
B- $\begin{array}{cc}\quad\quad\quad\text { Positive } &\quad\quad\quad\quad\quad\quad \text { Negative } \\\end{array}$
C- $\begin{array}{cc}\quad\quad\quad\text { Negative } &\quad\quad\quad\quad\quad\quad \text { Positive } \\\end{array}$
D- $\begin{array}{cc}\quad\quad\quad\text { Negative } &\quad\quad\quad\quad\quad\quad \text { Negative }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 14

General risk contingencies are required to be disclosed in the financial statements.

Question 15

The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit is that:

A)The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date.
B)The auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred.
C)The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of field work.
D)The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.

Question 16

Subsequent events that provide additional evidence as to conditions that existed at the balance sheet date may result in adjusting journal entries.

Question 17

Dual-dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

Question 18

Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit?

A)Obtain assurance from the entity's attorney that all material litigation has been disclosed in the financial statements.
B)Verify the clerical accuracy of the entity's proof of cash and its bank cutoff statement.
C)Determine whether reportable conditions have been corrected.
D)Calculate an estimate the total of uncorrected misstatements in the financial statements.

Question 19

The Miscellaneous Revenue account should only be analyzed if it is material in amount.

Question 20

Auditors have a responsibility to report on all FASB-required supplementary information for publicly-traded companies.

Question 21

A refusal by a lawyer to furnish information related to litigation included in the letter of inquiry is likely to result in:

A)Confirmation of related lawsuits with the claimants.
B)Qualification of the audit report.
C)An assessment that loss of the litigation is probable.
D)An adverse opinion.

Question 22

If,after issuing an audit report,the auditors find that they have failed to perform certain significant audit procedures they should first:

A)Attempt to determine whether their report is still being relied upon by third parties.
B)Notify regulatory agencies.
C)Notify legal counsel.
D)Wait until the beginning of the next year's audit to determine whether misstatements have occurred.

Question 23

An approach that quantifies the total of uncorrected misstatement as of the current year-end based on the effects of reflecting misstatements during the current year (and not considering any unadjusted previous year misstatements)is referred to as the:

A)Evaluation materiality approach.
B)Iron curtain approach.
C)Projected misstatement approach.
D)Rollover approach.

Question 24

Which of the following types of matters do not generally require disclosure in the financial statements?

A)General risk contingencies.
B)Commitments.
C)Loss contingencies.
D)Liabilities to related parties.

Question 25

An example of an internal control weakness is to assign the human resource department responsibility for:

A)Maintaining time cards.
B)Hiring personnel.
C)Authorizing deductions from pay.
D)Interviewing employees for jobs.

Question 26

Material loss contingencies should be recorded in the financial statements if available information indicates it is probable that a loss had been sustained prior to the balance sheet date and the amount of such loss can be reasonably estimated.For a public company these considerations will affect the audit report as follows:

A)If a loss meets these criteria,the auditor may issue an unqualified opinion but is required to point out the contingency in an explanatory paragraph of the report.
B)If a loss meets these criteria and is disclosed in the financial statement notes,the auditor may issue an unqualified opinion,but is required to point out the contingency in an explanatory paragraph of the report.
C)If a loss meets these criteria and is disclosed in the financial statement notes,the auditor may issue an unqualified opinion,but should consider adding an explanatory paragraph as a means of emphasizing the disclosure.
D)If a loss is probable but the amount cannot be reasonably estimated and is disclosed in the notes to the financial statements,the auditor may issue an unqualified opinion.

Question 27

The review of audit working papers by the audit partner is normally completed:

A)Prior to year-end.
B)Immediately as each working paper is completed.
C)Near the completion of the audit.
D)After issuance of the audit report,but prior to required subsequent event review procedures.

Question 28

Which of the following is not a procedure that auditors typically perform to search for significant events during the period after year-end but prior to the audit report date?

A)Review minutes of board of directors' meeting.
B)Review the latest available interim financial statements.
C)Inquire about any unusual adjustments made subsequent to the balance sheet date.
D)Perform analytical procedures in the period subsequent to the balance sheet date.

Question 29

Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies?

A)Obtaining a lawyers' letter.
B)Confirming accounts payable.
C)Reviewing the minutes of board of directors' meetings.
D)Review correspondence with banks.

Question 30

Management estimates the company's allowance for doubtful accounts as $200,000,and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000,with all points in that interval equally likely.The judgmental misstatement in this situation is:

A)$0.
B)$30,000.
C)$40,000.
D)$50,000.

Question 31

Management estimates the company's allowance for doubtful accounts as $200,000,and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000.The factual misstatement in this situation is:

A)$0.
B)$30,000.
C)$40,000.
D)$50,000.

Question 32

For clients that distribute checks or cash payments and have significant payroll control weakness,which of the following audit procedures is aimed at determining whether every name on the company payroll is a bona fide employee actually on the job?

A)A surprised observation of a paycheck distribution,while establishing the identity of each employee receiving payment.
B)A test of payroll extensions.
C)Analytical comparisons of budgeted to actual payroll expense.
D)Comparison of payee names on canceled payroll checks with the payroll register.

Question 33

Which of the following is not a procedure normally performed while completing the audit of a public company?

A)Obtain a lawyer's letter.
B)Obtain a representations letter.
C)Perform an overall review using analytical procedures.
D)Update internal control questionnaire.

Question 34

Auditors must communicate internal control "significant deficiencies" to:

A)The audit committee.
B)The shareholders.
C)The SEC.
D)The Federal Trade Commission.

Question 35

Which of the following information need not be reported in the auditors' report of a nonpublic company if the information is considered to be properly stated after performing appropriate procedures?

A)FASB-required supplementary information.
B)Other information in documents containing audited financial statements.
C)Supplementary information in relation to the financial statements as a whole.
D)GASB-required supplementary information.

Question 36

Which of the following subsequent events might require an adjustment to the client's financial statements?

A)A business combination with another company.
B)A major customer declares bankruptcy causing a material receivable to be uncollectible.
C)Loss of plant and equipment due to a fire.The loss in insured.
D)Plant employees could possibly go on strike.

Question 37

Which of the following procedures is not a procedure that is completed near the end of the engagement?

A)Review cash transactions.
B)Review to identify subsequent events.
C)Obtain the lawyer's letter.
D)Obtain the letter of representations.

Question 38

In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements,the auditors accumulate:

A)Factual misstatements in the financial statements.
B)Judgmental misstatements in the financial statements.
C)Factual and judgmental misstatements in the financial statements.
D)Factual,judgmental and projected misstatements and an allowance for undetected misstatements in the financial statements.

Question 39

Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors?

A)Dividends.
B)New debt issuance.
C)New bank accounts.
D)Write-off of trade accounts receivable.

Question 40

Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n):

A)Extrapolation difference.
B)Factual misstatement.
C)Redundancy effect misstatement.
D)Projected misstatement.

Question 41

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

A)Sale of long-term debt or capital stock.
B)Loss of a plant as a result of a flood.
C)Major purchase of a business which is expected to double the sales volume.
D)Settlement of litigation in excess of the recorded liability.

Question 42

The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:

A)Last day of significant field work.
B)Report cutoff date.
C)Report release date.
D)Representation date.

Question 43

To minimize the opportunities for fraud,unclaimed cash payroll should be:

A)Deposited in a safe deposit box.
B)Held by the payroll custodian.
C)Deposited in a special bank account.
D)Held by the controller.

Question 44

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,the decrease in this year's income due to these understatements is:

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

Question 45

An auditor's decision concerning whether or not to "dual-date" the audit report is based upon the auditor's willingness to:

A)Extend auditing procedures.
B)Accept responsibility for year-end adjusting entries.
C)Permit inclusion of a note captioned: event (unaudited)subsequent to the date of the auditor's report.
D)Assume responsibility for resolving all events subsequent to the issuance of the auditor's report.

Question 46

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

A)Determine whether inventory ordered before the year-end was included in the physical count.
B)Inquire about payroll checks that were recorded before year-end but cashed after year-end.
C)Investigate changes in capital stock recorded after year-end.
D)Review tax returns prepared by management after year-end.

Question 47

The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:

A)Letter of audit inquiry to the client's lawyer.
B)Letter of corroboration from the auditor's lawyer upon review of the legal documentation.
C)Confirmation of claims and assessments from the other parties to the litigation.
D)Confirmation of claims and assessments from an officer of the court presiding over the litigation.

Question 48

An approach that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting all misstatements existing in the balance sheet at the end of the current year including those that occurred in prior years is referred to as:

A)Evaluation materiality approach.
B)Iron curtain approach.
C)Projected misstatement approach.
D)Rollover approach.

Question 49

A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel.This procedure is designed to provide evidence in support of the audit proposition that:

A)Only bonafide employees worked and their pay was properly computed.
B)Jobs on which employees worked were charged with the appropriate labor cost.
C)Internal control relating to payroll disbursements are operating effectively.
D)Employees worked the number of hours for which their pay was computed.

Question 50

Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer?

A)"Sufficient audit evidence has been made available to the auditor to permit the issuance of an unqualified opinion."
B)"There are no unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed."
C)"We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities."
D)"No events have occurred subsequent to the balance sheet date that would require adjustment to,or disclosure in,the financial statements."

Question 51

Which of the following is an analytical procedure that should be applied to the income statement?

A)Select sales and expense items and trace amounts to related supporting documents.
B)Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.
C)Obtain from the proper client representatives,the beginning and ending inventory amounts that were used to determine costs of sales.
D)Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.

Question 52

It would be appropriate for the payroll accounting department to be responsible for which of the following functions?

A)Approval of employee time records.
B)Maintenance of records of employment,discharges,and pay increases.
C)Preparation of periodic governmental reports as to employees' earnings and withholding taxes.
D)Distribution of paychecks to employees.

Question 53

Which of the following is not correct relating to representation letters?

A)They are ordinarily dated as of the date of the audit report.
B)They are signed by members of top management.
C)They must be obtained for audits.
D)They often serve as a substitute for the application of other procedures.

Question 54

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,or assessments.The primary reason for this request is to provide the auditors with:

A)An estimate of the dollar amount of the probable loss.
B)An expert opinion as to whether a loss is possible,probable,or remote.
C)Information concerning the progress of cases to date.
D)Corroborative audit evidence.

Question 55

A CPA reviews a client's payroll procedures.The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for:

A)Reviewing and approving time reports for subordinate employees.
B)Distributing payroll checks to employees.
C)Hiring subordinate employees.
D)Initiating requests for salary adjustments for subordinate employees.

Question 56

Which of the following is the best reason why the auditors should consider observing a client's distribution of regular payroll checks?

A)Separation of payroll duties is less than adequate for effective internal control.
B)Total payroll costs are a significant part of total operating costs.
C)The auditors did not observe the distribution of the entire regular payroll during the audit in the prior year.
D)Employee turnover is excessive.

Question 57

Which of the following auditing procedures is ordinarily performed last?

A)Reading of the minutes of the directors' meetings.
B)Confirming accounts payable.
C)Obtaining a management representation letter.
D)Testing of the purchasing function.

Question 58

One reason why the independent auditors perform analytical procedures on the client's operations is to identify:

A)Weaknesses of a material nature in internal control.
B)Noncompliance with prescribed control procedures.
C)Improper separation of accounting and other financial duties.
D)Unusual transactions.

Question 59

The purpose of segregating the duties of distributing payroll checks and hiring personnel is to:

A)Separate the custody of assets from the accounting for those assets.
B)Establish clear lines of authority and responsibility.
C)Separate duties within the accounting function.
D)Separate the authorization of transactions from the custody of related assets.

Question 60

With respect to issuance of an audit report which is dual-dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditors' report,the auditors' responsibility for events occurring subsequent to the date of the audit report is:

A)Extended to include all events occurring until the date of the last subsequent event referred to.
B)Limited to the specific event referred to.
C)Limited to all events occurring through the date of issuance of the report.
D)Extended to include all events occurring through the date of submission of the report to the client.

Question 61

The auditors have calculated the total uncorrected identified misstatements as $445,000;materiality for the audit is $450,000.The client has declined to record the related journal entries.In this situation it is most likely that the auditors will:

A)Conclude that the financial statements are not materially misstated.
B)Issue a disclaimer of opinion.
C)Perform additional audit procedures to reduce audit risk to an appropriately low level.
D)Resign from the audit.

Question 62

A nonpublic client has provided required supplementary information with its audited financial statements.The auditor's proper reporting responsibility includes:

A)other-matter paragraph should be added to the audit report.
B)A separate report should be issued on the required supplementary information.
C)An adverse opinion on the required supplementary information.
D)The required supplementary information should not be referred to.

Question 63

An attorney responding to an auditor as a result of the client's letter of audit inquiry may appropriately limit the response to:

A)Items which have high probability of being resolved to the client's detriment.
B)Asserted claims and pending or threatened litigation.
C)Legal matters subject to unsettled points of law,uncorroborated information,or other complex judgments.
D)Matters to which the attorney has given substantive attention in the form of legal consultation or representation.

Question 64

If management refuses to furnish certain written representations that the auditor believes are essential,which of the following is appropriate?

A)The auditor can rely on oral evidence relating to the matter as a basis for an unmodified (unqualified)opinion.
B)The client's refusal does not constitute a scope limitation that may lead to a modification of the opinion.
C)This may have an effect on the auditor's ability to rely on other representations of management.
D)The auditor should issue an adverse opinion because of management's refusal.

Question 65

Which of the following summarizes the threshold at which auditors are required to request management to record any identified factual misstatements that are:

A)Material.
B)Material or immaterial.
C)Significant deficiencies.
D)Other than trivial.

Question 66

To which of the following matters would materiality limits not apply when obtaining written client representations?

A)Violations of state labor regulations.
B)Disclosure of line-of-credit arrangements.
C)Information about related party transactions.
D)Instances of fraud involving management.

Question 67

Which of the following procedures would an auditor most likely perform prior to the balance sheet date?

A)Review subsequent events.
B)Perform search for unrecorded liabilities.
C)Send inquiry letter to client's legal counsel.
D)Review detail and test significant travel and entertainment expenses.

Question 68

In the course of the audit of financial statements for the purpose of expressing an opinion thereon,the auditors will normally prepare a schedule of unadjusted differences for which the auditors did not propose adjustments when they were identified.What is the primary purpose served by this schedule?

A)To point out to the responsible client officials the errors made by various company personnel.
B)To summarize the adjustments that must be made before the company can prepare and submit its federal tax return.
C)To identify the potential financial statement effects of misstatement or disputed items that were considered immaterial when discovered.
D)To summarize the misstatements made by the company so that corrections can be made after the audited financial statements are released.

Question 69

An auditor will ordinarily examine invoices from lawyers primarily in order to:

A)Substantiate accruals.
B)Assess the legal ramifications of litigation in progress.
C)Estimate the dollar amount of contingent liabilities.
D)Identify possible unasserted litigation,claims,and assessments.

Question 70

On February 9,Brown,CPA,expressed an unmodified (unqualified)opinion on the financial statements of Web Co.On October 9,during a peer review of Brown's practice,the reviewer informed Brown that engagement personnel failed to perform a search for subsequent events for the Web engagement.Brown should first:

A)Request Web's permission to perform substantive procedures that would provide a satisfactory basis for the opinion.
B)Inquire of Web whether there are persons currently relying,or likely to rely,on the financial statements.
C)Take no additional action because subsequent events have no effect on the financial statements that were reported on.
D)Assess the importance of the omitted procedures to Brown's present ability to support the opinion.

Question 71

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

A)Letter of audit inquiry to the client's lawyer.
B)Letter of corroboration from the auditor's lawyer upon review of the legal documentation.
C)Confirmation of claims and assessments from the other parties to the litigation.
D)Confirmation of claims and assessments from an officer of the court presiding over the litigation.

Question 72

An auditor should obtain written representations from the company's attorney concerning litigation claims and assessments,which may be limited to matters that are considered either individually or collectively material.An understanding on the limits of materiality for this purpose has been reached by:

A)The auditor and the client's lawyer.
B)Management and the auditor.
C)Management,the client's lawyer,and the auditor.
D)The auditor independently of management.

Question 73

The auditors' best course of action with respect to "other information (not including required supplemental information)" included in an annual report containing the auditors' report is to:

A)Indicate in the auditors' report,that the "other financial information" is only compiled.
B)Consider whether the "other financial information" is accurate by performing a limited review.
C)Obtain written representations from managements as to the material accuracy of the "other financial information."
D)Read and consider the manner of presentation of the "other financial information."

Question 74

Effective internal control over the payroll function would include which of the following?

A)Total time recorded on time clock cards should be reconciled to job reports by employees responsible for those specific jobs.
B)Payroll department employees should be supervised by the management of the personnel department.
C)Payroll department employees should be responsible for maintaining employee personnel records.
D)Total time spent on jobs should be compared with total time indicated on time clock punch cards.

Question 75

The proper use of prenumbered termination forms by the payroll department should provide assurance that all:

A)Uncashed payroll checks were issued to employees who have not been terminated.
B)Personnel files are kept up to date.
C)Employees who have not been terminated receive their payroll checks.
D)Terminated employees are removed from payroll.

Question 76

When a nonpublic audit client has omitted required supplementary information,the audit report should include a(n)?

A)Disclaimer of opinion.
B)Other-matter paragraph.
C)Qualified opinion.
D)Statement indicating that the financial statements should not be relied upon.

Question 77

Hall accepted an engagement to audit the year 1 financial statements of XYZ Company.XYZ completed the preparation of the year 1 financial statements on February 13,year 2,and Hall began the audit work on February 17,year 2.Hall completed the audit work on March 24,year 2,and completed the report on March 28,year 2.The client's representation letter normally would be dated:

A)February 13,year 2.
B)February 17,year 2.
C)March 24,year 2.
D)March 28,year 2.

Question 78

The primary objective of analytical procedures used near the end of an audit is to:

A)Obtain evidence from details tested to corroborate particular assertions.
B)Identify areas that represent specific risks relevant to the audit.
C)Assist the auditor when forming overall conclusions about the financial statements.
D)Satisfy doubts when questions arise about a client's ability to continue in existence.

Question 79

The auditors used statistical sampling for the audit of inventory and calculated an estimated total audited value of $1,100,000;the client's book value for inventory is $1,200,000.This misstatement is properly classified as a:

A)Factual misstatement.
B)Judgmental misstatement.
C)Projected misstatement.
D)Relevance misstatement.

Question 80

An auditor believes that a client's warranty liability is between $100,000 and $130,000,with each amount in that interval equally likely.The financial statements show a liability of $90,000.

A)$10,000 judgmental misstatement.
B)$10,000 projected misstatement.
C)$20,000 judgmental misstatement.
D)$20,000 projected misstatement.