Question

An approach that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting all misstatements existing in the balance sheet at the end of the current year, irrespective of whether the misstatements occurred in the current or previous years is referred to as the:

A. Evaluation materiality approach.
B. Iron curtain approach.
C. Projected misstatement approach.
D. Rollover approach.

Answer 1

The approach in question is called the Iron curtain approach, which ensures that the financial statements do not contain any errors that can materially misstate an entity's position by addressing all misstatements in the balance sheet.

Step-by-step explanation:

The approach that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting all misstatements existing in the balance sheet at the end of the current year, irrespective of whether the misstatements occurred in the current or previous years, is referred to as the Iron curtain approach. This approach focuses on correcting all identified misstatements in the financial statements to ensure that the balance sheet does not contain errors that could materially misstate the financial position of an entity. On the other hand, the rollover approach looks primarily at the income statement and focuses on the cumulative effect of misstatements that originate in the current period.