A company does not realize that an employee is stealing some of its inventory, and therefore its records do not reflect this theft. This misstatement can be said to arise during the

Question

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The misstatement arises during the recognition stage because the company failed to recognize the theft of inventory by an employee. The recognition stage involves identifying and recording transactions or events that affect the financial statements. In this case, the theft of inventory should have been recognized and recorded, but it was not. This results in a misstatement in the financial statements.

A Company Does Not Realize That an Employee Is Stealing