In-Class Team Case 1648. The audit staff of Adams, Barnes & co. (ABC), CPAs, reported the following audit findings in their 20X5 audit Of Keystone Computers & Networks (KCN), Inc.: l. Unrecorded liabilities in the amount of $6,440 for purchases of inventory. These inventory items were counted and included in the year-end total. 2. Projected misstatement from confirmation of accounts receivable in the amount of S2,042 understatement. 3. Projected misstatement from price tests of inventory Of $9,510 overstatement. 4. The staff of ABC believes that the amount of KCN's allowance for uncollectible accounts should be increased by $5,000. Thanks for rating! Rate 2 more documents to earn a free unlock. Auditing Operations and Completing the Audit 669 In addition, the audit staff has decided that for evaluating a material misstatement of the finan- Cial statements, the following guidelines should be used: tequired: a b. Current assets$50 Noncurrent assetsS75 ,000 Current liabilities$50,000 Noncurrent liabilities$ 5 Total owners Net income before Prepare a schedule modeled after Figure 16.5 on page 650 to be used to evaluate the above audit findings, assuming that KCN's marginal tax rate is 25 percent. Decide whether the results indicate that there is a sufficiently low risk of material misstate- ment to justify ABC's audit opinion.