Question

Once the final outcome of a transaction or event occurs _______.

1) it is expected that there will be a difference between the outcome of the accounting estimate and the amount originally recognized or disclosed in the financial statements
2) it is expected that there will be no difference between the outcome of the accounting estimate and the amount originally recognized or disclosed in the financial statements
3) the amount should be adjusted to match the estimated balance
4) the auditor should not concern themselves with investigating abnormally large variances

Answer 1

The correct answer is 1) it is expected that there will be a difference between the outcome of the accounting estimate and the amount originally recognized or disclosed in the financial statements.

Step-by-step explanation:

The correct answer is 1) it is expected that there will be a difference between the outcome of the accounting estimate and the amount originally recognized or disclosed in the financial statements.

When a transaction or event occurs, the financial outcome may differ from the original estimate made by the company. This is because estimates are based on various factors such as historical data, assumptions, and judgments, and they may not always accurately predict the final outcome.

For example, a company may estimate the value of its inventory at the end of the year, but the actual value could be higher or lower than the estimate. In such cases, the company would need to adjust the value in its financial statements to reflect the actual outcome.