You are auditing prepaid expenses. The total balance is $2 million. Assume you used sampling and you selected three items to test. You compared them to the supporting documentation and found the following: Item 1 recorded correctly as $5,000 Item 2 recorded correctly as $3,000 Item 3 recorded as $2,000, but it was a typo, and it should have been recorded as $200. Assume the overall materiality is $500,000, the performance materiality is $400,000. Does the result of your test suggest a potential material misstatement in prepaid expenses? Explain how you determine that.

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