Unformatted text preview: most likely to be misstated since companies would be more likely to overstate rather than understate asset accounts. Since some customers experience financial difficulties, in this case, the allowance for doubtful accounts may be understated which impacts the valuation assertion. Since the company has recently implemented cut backs they may be experiencing a slowdown in sales. If the company is pressured to meet earnings target they cannot achieve legitimately, the company may purposely misstate sales using fake transactions or through channel stuffing and side agreements to meet targets expectations. When discussing inventory the assertion to be misstated is valuation since the company as slow moving inventory. This creates the risk that the inventory is obsolete or has lost value and may be overstated on the balance sheet with an equal understatement of cost of goods sold on the income statement...
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This note was uploaded on 02/22/2011 for the course ACCT 497 taught by Professor Rainwater during the Fall '10 term at University of Phoenix.
- Fall '10