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| Cuthbert Industrials, Inc. prepares three-year comparative financial statements. In year 3, Cuthbertdiscovered an error in the previously issued financial statements for year 1. The error affects the financialstatements that were issued in years 1 and 2. How should the company report the error? A. The financial statements for years 1 and 2 should be restated; an offsetting adjustment to the cumulative effect of the error should be made to the comprehensive income in the year 3 financial statements. B. The financial statements for years 1 and 2 should not be restated; financial statements for year 3 should disclose the fact that the error was made in prior years. C. The financial statements for years 1 and 2 should not be restated; the cumulative effect of the error on years 1 and 2 should be reflected in the carrying amounts of assets and liabilities as of the beginning of year 3. D. The financial statements for years 1 and 2 should be restated; the cumulative effect of the error on years 1 and 2 should be reflected in the carrying amounts of assets and liabilities as of the beginning of year 3. |
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