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.

Question

Quizplus · Accepted Answer

The auditor's belief range is $100,000 to $130,000, and the financial statement liability is $90,000. Since the actual liability falls within the range, there is no projected misstatement. However, since the actual liability is less than the lowest amount in the range, there is a judgmental misstatement of $10,000. Therefore, choice A is correct.

An Auditor Believes That a Client's Warranty Liability Is Between