Argo Co: Part II Based on their testing, the audit team concluded that the total projected misstatements are as follows: Sales: $235,506 Cash: $258,046 . Land: $173,338 The cash misstatement amount is based on the result of a cash confirmation from a bank that was $258,046 less than the reported client balance. The misstatement in the Land account resulted from Argo's failure to remove the land from its books after donating it to charity. The Summary of Discovered Misstatements table below shows three sales transactions that contain misstatements. Summary of Discovered Misstatements (Sales Account) Selection Number Reported Sale Audited Sale Misstatement Notes Amount 5 $86,178.46 Amount $68,178.46 17 $217,934.70 $0 $18,000 Transposition error $217,934.70 Recorded in wrong accounting period 23 21 $135,476.94 $135,905.64 $(428.70) Incorrect amount recorded Total Misstatement $235,506.00 1 Assume the audit engagement team determined performance materiality to be $240,864 for each account above (note that this amount will likely not agree with the amounts you determined above). Evaluate each misstatement listed above at the financial statement account level to determine whether or not each would be considered material. Explain your rationale for each misstatement. + Normal Font - Size A- A-| BIUS x, x x = = = a ba EE 99 8x 2 Refer to the Summary of Discovered Misstatements (Sales Account) table above. Discuss how offsetting misstatements should be treated when evaluating the materiality of those misstatements. (Note: This is a general question about the subject of the proper treatment of misstatements in an account balance that go in the opposite direction. You may use the specific sales misstatements as an example, but the question is not about how you would treat each of the three misstatements.) Normal Font Size a ba BIUS x, x x 1 AA- EE 99 8 8 3 Assume that the overstatement of the Cash account in this example was intentional. Without regard to your prior answers, how would the intentional overstatement of Cash or the intentional misstatement of any account within the financial statements influence your evaluation of the materiality of that misstatement? How would that information influence other aspects of the audit? X Format . Font Size A-A- 9 b BIUS x, x x = = EE 99 I 88