The dollar amount of some misstatements cannot be accurately measured. For example, if the client were unwilling to disclose an existing legal action, the auditor must estimate:
A) its effect on management's future decisions.
B) its effect on the auditor's exposure to lawsuits.
C) its effect on users of the financial report.
D) its effect on net income.

Question

Quizplus · Accepted Answer

If the client is unwilling to disclose an existing legal action, the auditor must disclose this fact in the financial report and evaluate the possible effects of the legal action. However, the dollar amount of the possible misstatement cannot be accurately measured. This misstatement affects the users of the financial report by not providing them with complete information. Therefore, option C is the best choice as it describes the effect of the misstatement on the users of the financial report.

The Dollar Amount of Some Misstatements Cannot Be Accurately Measured