Each of the following is a type of known misstatement, except:

Question

Each of the following is a type of known misstatement, except:

BlackTom AI · Accepted Answer

The question presents: 'Each of the following is a type of known misstatement, except:' and provides one option: 'differences between management and the auditor's judgment regarding estimates.'

First, consider what a known misstatement is in auditing terms. A known misstatement is an error or omission in financial statements that the auditor can quantify and directly determine. It is observable in the accounting records or external evidence and can be clearly identified as incorrect.

Analyzing the provided option:
- 'Differences between management and the auditor's judgment regarding estimates' describes a discrepancy in opinion about accounting estimates. This is a difference in professional judgment, not an error that can be quantified in the financial statements. Therefore, it does not constitute a known misstatement.

Now, in a typical multiple-choice set for this topic, other options would likely include items that are actual misstatements that can be quantified, such as:
- Clerical errors in ledgers or posting
- Arithmetic mistakes in applying accounting policies
- Misstatements arising from incorrect data used to compute estimates that can be quantified when comparing them to appropriate evidence

However, since no other options are provided in the prompt, we cannot evaluate them directly. With the sole option given, the reasoning is that it describes a judgmental difference rather than a misstatement that is known and quantifiable, which explains why it would be the exception to the rule.

In summary, the key distinction is that a known misstatement must be something that can be identified and measured in the financial statements, whereas a difference in judgment about estimates is a matter of professional disagreement rather than a discovered misstatement.

ACG442_A_2025SPRING Chapter 06 Class Quiz

Each of the following is a type of known misstatement, except:

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