Understatement errors are far more likely to occur in the long-term debt and owner's equity process than overstatement errors.

Question

Quizplus · Accepted Answer

Understatement errors in long-term debt and owner's equity can occur due to missed interest or dividend payments, unrecorded debt or equity transactions, or incorrect calculation of interest or dividend payments. These errors are more likely than overstatement errors such as recording incorrect interest or dividend amounts or overstating the amount of debt or equity.

Understatement Errors Are Far More Likely to Occur in the Long-Term