Assume materiality for the financial statements as a whole is $100,000 and performance materiality for...
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Accounting
Assume materiality for the financial statements as a whole is $100,000 and performance materiality for accounts receivable is set at $40,000. If the auditor finds one receivable that is overstated by $55,000, what should the auditor do?
A. If performance materiality for accounts receivable is $40,000 and the auditor finds a $55,000 overstatement of a receivable balance, the auditor would document the misstatement and evaluate results of the remaining audit procedures in accounts receivable.
B. If accounts receivable testing was performed using sampling techniques, the auditor would also project total known misstatements to the population and may perform additional tests depending on the outcome.
C. The $55,000 overstatement is an example of a known misstatement. The auditor could request the client make an adjustment to correct the overstatement or make a note of the overstatement for follow-up at a later point in the audit.
D. All of the above
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