If the auditors discover that the carrying amount of a client's investments is overstated because of a loss in value that is other than a temporary decline in market value,they should insist that
A) The approximate market value of the investments be shown in parentheses on the face of the balance sheet.
B) The investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes.
C) The loss in value be recognized in the financial statements.
D) The equity section of the balance sheet separately show a charge equal to the amount of the loss.

Question

Quizplus · Accepted Answer

The loss in value due to a reason other than the temporary decline in market value needs to be recognized in the financial statements. This is in accordance with the Generally Accepted Accounting Principles (GAAP) and the auditor's responsibility to ensure the financial statements are fairly stated. Options A, B, and D do not address the issue of recognizing the loss in value appropriately in the financial statements.

If the Auditors Discover That the Carrying Amount of a Client's