The dollar amount of some misstatements cannot be accurately measured. If, for example, the client was unwilling to disclose an existing lawsuit, the materiality question the auditor must evaluate in such a situation is
A) what effect will it have on net income.
B) how will it affect management's future decisions.
C) whether it may increase the auditor's exposure to lawsuits.
D) what effect it will have on statement users.

Question

Quizplus · Accepted Answer

In situations where the dollar amount of misstatements cannot be accurately measured, the auditor must evaluate the effect of the misstatement on statement users. This is because the primary objective of an audit is to provide assurance to users that the financial statements are free from material misstatements that may affect their decision-making. Therefore, the auditor needs to consider the potential impact of the undisclosed lawsuit on statement users to determine whether it is material and requires disclosure in the financial statements.

The Dollar Amount of Some Misstatements Cannot Be Accurately Measured