Under Auditing Standards, which of the following would be classified as an error?
A)Misappropriation of assets for the benefit of management.
B)Misinterpretation by management of facts that existed when the financial statements were prepared.
C)Preparation of records by employees to cover a fraudulent scheme.
D)Intentional omission of the recording of a transaction to benefit a third party.

Question

Quizplus · Accepted Answer

Errors in financial statements can arise from a misinterpretation of facts, not necessarily involving intentional wrongdoing or fraud. Misinterpretation by management of facts that existed when the financial statements were prepared (option B) is considered an error because it results from a misunderstanding or mistake in processing the financial information, rather than from an intentional act to deceive.

Under Auditing Standards, Which of the Following Would Be Classified