Rosie Is the External Auditor of Texas Two Steps, a Privately-Owned

Multiple Choice

Rosie is the external auditor of Texas Two Steps, a privately-owned dance company in Texas. Rosie believes the owner of the company is skimming cash off the top. She approaches the owner who explains that the money will be replaced in the following month after he refinances his house. Rosie accepts the owner's explanation but reclassifies the expenditure as a receivable of the company from the owner. Rosie's reasoning best reflects:

A) Stage 1
B) Stage 2
C) Stage 3
D) Stage 4