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

Question

Quizplus · Accepted Answer

The misstatement of an existing lawsuit can have an impact on the users of financial statements, such as investors, creditors, and analysts who rely on the information to make decisions. Therefore, the estimation of the likely effect on users of financial statements is more appropriate than the effect on net income, the auditor's exposure to lawsuits, or management's future decisions.

The Dollar Amount of Some Misstatements Cannot Be Accurately Measured