This is a theoretical question and independent of the TWE audit. Assume Audit Firm X uses 1% of total assets as a base for calculating preliminary materiality. Assume that total assets is $1,000,000 and included in the total assets figure of $1,000,000 is an Inventory account balance of $150,000. As a result of their audit the auditors conclude that inventory in overstated by $4,000 and management refuse to adjust the financial statements to reflect the true situation. Do you think the:

(i) ..... inventory balance is unfairly stated (word limit – 100 word); and/or.

(ii) ....... the entire financial statements are unfairly stated (word limit – 100 words)..

Answer rating: 100% (QA)

i Yes inventory balance is unfairly stated First whether the firm has done the correct thing by repo... View the full answer