"A small law firm in Chicago was having their payroll and accounting done by a part-time employee. This employee often mentioned that the company was growing quickly and that it was becoming almost impossible to complete all accounting functions within the time allotted. This past year, the law office had their accounting records audited, and they received an audit that identified two instances in which the adjusting entry for accrued salaries did not happen. What impact did this have on the financial statements?" The liabilities would be overstated. The cash account would be understated. "There was no impact, because the salaries did in fact get paid." The net income would be overstated.