Because municipalities have received increased federal and state funding for environmental purposes - Decrease.
TWD's Board of Directors is controlled by Janice Mead, the majority stockholder, who also acts as the chief executive officer - Increase.
<h3>What is material misstatement?</h3>
A major misrepresentation is information in the financial statements that is sufficiently false to have an effect on someone who relies on those statements in making financial decisions.
Note that In the case of publicly traded corporations, the board of directors (B of D) is the group responsible for setting strategy and supervising management. The board normally convenes on a regular basis. A board of directors is required for every publicly traded firm.
Therefore, in regards to material misstatement in the cases above, there is a decrease in the first one because funds is going to two different places while is increasing in the second because the person is part of the board and holds some amount of power.
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You are working with William Bond, CPA, and you are considering the risk of material misstatement in planning the audit of Toxic Waste Disposal (TWD) Company's financial statements for the year ended December 31, 20X0. TWD is a privately owned entity that contracts with municipal governments to remove environmental waste. TWD's Board of Directors is controlled by Janice Mead, the majority stockholder, who also acts as the chief executive officer.
Based only on the information below, indicate whether each of the following factors would most likely increase, decrease, or have no effect on the risk of material misstatement.
Because municipalities have received increased federal and state funding for environmental purposes, TWD returned to profitability for the first year following three years with losses.
TWD's Board of Directors is controlled by Janice Mead, the majority stockholder, who also acts as the chief executive officer.
