[Jdinh04]

Which of the following relatively small misstatements most likely could have a material effect on an entity’s financial statements?

a. An uncollectible account receivable that was not written off.

b. An illegal payment to a foreign official that was not recorded. (Answer)

c. A petty cash fund disbursement that was not properly authorized.

d. A piece of obsolete office equipment that was not retired.

Not exactly sure how to approach this question and answer it without understanding it. The answer is B, but how come?

This was the explanation they had for it.

Choice “b” is correct. An illegal payment of an otherwise immaterial amount could be material if there is a reasonable possibility that it could lead to a material contingent liability or a material loss of revenue.

AUD - Awaiting score, please be a pass!
FAR - Apr 2014
BEC - May 2014
REG - July 2014

Using Becker Self-Study

[sieverd]

The way I understood the question is that the company could potentially get sued for using bribes to unfairly gain an edge in competition and the lawsuit could have a material effect on the FS.

Hope this helps, but then again Audit is the only one I have failed so take it with a grain of salt (rematch 1/3/14)

REG: 80 (4/1/13)
BEC: 87 (5/29/13)
FAR: 82 (7/31/13)
AUD: 63, 69, 86 (1/3/14)

"Separation is in the preparation" - Russell Wilson

Using Becker Self Study & Ninja Audio

[sieverd]

The way I understood the question is that the company could potentially get sued for using bribes to unfairly gain an edge in competition and the lawsuit could have a material effect on the FS.

Hope this helps, but then again Audit is the only one I have failed so take it with a grain of salt (rematch 1/3/14)

REG: 80 (4/1/13)
BEC: 87 (5/29/13)
FAR: 82 (7/31/13)
AUD: 63, 69, 86 (1/3/14)

"Separation is in the preparation" - Russell Wilson

Using Becker Self Study & Ninja Audio

[Not a Quitter]

Because the other answers involve mistakes and the other is related to illegal activity. Immediate red flag that something larger than an immaterial mistake is going on in that company.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

Because the other answers involve mistakes and the other is related to illegal activity. Immediate red flag that something larger than an immaterial mistake is going on in that company.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

Okay sieverd's answer is a much better one than mine! what he/she said!

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

Okay sieverd's answer is a much better one than mine! what he/she said!

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Iron_Victory]

This question is looking to assert your understanding of materiality from a qualitative aspect.

They remove for you the quantitative aspect by telling you they are small misstatements so they would not be individually significant.

The only answer it can be is B from a strictly qualitative aspect.

AUD - (74),78
BEC - 85
FAR - 86
REG - 84

[Iron_Victory]

This question is looking to assert your understanding of materiality from a qualitative aspect.

They remove for you the quantitative aspect by telling you they are small misstatements so they would not be individually significant.

The only answer it can be is B from a strictly qualitative aspect.

AUD - (74),78
BEC - 85
FAR - 86
REG - 84

[Author]

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