ou are auditing the $2022$ and $2023$ financial statements of Smith Corp. You notice that in $2022$ the ending inventory was overstated. What do you expect to see on the $2023$ financial statements? On the income statement, net income will

not be affected, and on the balance sheet, assets and stockholders' equity will be overstated.

be understated, and on the balance sheet, assets and stockholders' equity will be overstated.

be understated, and on the balance sheet, assets and stockholders' equity will not be affected.

not be affected, and on the balance sheet, assets and stockholders' equity will not be affected.