Assume that a client has a recurring late cutoff error. Prior-year sales included $10 million of current-year sales, and current-year sales include $12 million of next year sales.
a. What is the misstatement under the (a) rollover method and (b) the iron curtain method?
b. Now assume that the client had an early cutoff error in the prior year such that $10 million of prior-year sales are included in current-year sales and a late cutoff error in the current year such that $12 million of next year sales are included in the current year. What is the misstatement under the (a) rollover method and (b) the iron curtain method?