In many audits of sales transactions substantive tests of transactions can be reduced in determining the completeness objective because
A) understatements of assets and income are a greater concern than overstatements.
B) overstatements of assets and income are a greater concern than understatements.
C) it doesn't matter if income is understated because the savings on income tax offsets the reduced revenue and net income is correct.
D) the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.

Question

Quizplus · Accepted Answer

Overstatements of assets and income are typically of greater concern in audits because they can artificially inflate a company's financial health, misleading stakeholders. Understatements, while also concerning, are often less prioritized in the context of fraud or financial statement manipulation.

In Many Audits of Sales Transactions Substantive Tests of Transactions