Quiz 9 - Which of the following is least likely to be...

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Which of the following is least likely to be appropriate as the basis for determining the preliminary judgment about materiality in the audit of a set of financial statements? a. Net income before taxes. b. Current assets. c. Owners’ equity. d. Inventory.
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Auditors generally allocate the preliminary judgment about materiality to a. the balance sheet only. b. the income statement only. c. the income statement and balance sheet. d. the statement of cash flows. The five steps in applying materiality are listed below in random order. 1. Estimate the combined misstatement. 2. Estimate the total misstatement in the segment. 3. Set preliminary judgment about materiality. 4. Allocate preliminary judgment about materiality to segments. 5. Compare combined estimate with preliminary judgment about materiality. The correct sequence from start to finish would be a. 1 2 5 4 3. b. 3 4 2 1 5. c. 4 3 1 5 2. d. 5 1 3 2 4. Discuss the three main factors that affect an auditor’s preliminary judgment about materiality.
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