When the auditors discover an understatement of liabilities,they would most likely also expect to find an:
A)Understatement of assets.
B)Understatement of owners' equity.
C)Overstatement of expenses.
D)Understatement of revenues.

Question

Quizplus · Accepted Answer

An understatement of liabilities usually means that the company is not recognizing some of its obligations. This would likely also mean that the corresponding assets have been understated or not recognized, as these liabilities would have been used to fund the assets. Therefore, the answer is A, an understatement of assets. B, an understatement of owners' equity, is unlikely, as the equity section is mainly affected by transactions with shareholders and not necessarily impacted by liabilities. C, an overstatement of expenses, and D, an understatement of revenues, are not directly linked to the recognition of liabilities, so they are not the best choices.

When the Auditors Discover an Understatement of Liabilities,they Would Most