7.Fill in the blanks by choosing one of the following terms (8 points) a. Overst

Question

7.Fill in the blanks by choosing one of the following terms (8 points) a. Overstate/overestimate b. Understate/underestimate c. Existence d. Completeness liabilities, and to Management has an incentive to assets revenues, and should prefer the treatment that would auditor should be especially careful to audit for the assets/revenues and the expenses. Conservatism dictates that where estimates are involved we revenues and expenses. Thus the assertion when auditing assertion when auditing liabilities/expenses

Explanation / Answer

Management has an incentive to Understate assets, overstate liabilities to understate the revenue and overstate expense. Conservatism dictates that where estimates are involved we should prefer the treatment that would underestimate revenue and overestimate expense. Thus the auditor should be especially careful to audit for the existence assertion when auditing the assets/ revenue and the completeness assertion when auditing liabilities/expense.

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