The Five Steps in Applying Materiality Are Listed Below in Random

question 103

Multiple Choice

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 judgement of materiality.
4) Allocate preliminary judgement of materiality to segments.
5) Compare combined estimate with preliminary judgement 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.

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Definitions:

Carrying Amount

The monetary value of an asset or liability as recorded on the balance sheet, factoring in depreciation, amortization, or impairment.

Unamortized Premium

The portion of a bond premium that has not yet been amortized (gradually written off) over the period of the bond's life.

Face Value

The nominal or dollar value printed on a security or a bond, representing its legal value.

Instalment Payment

A method of payment whereby the total cost of a purchase is divided into smaller amounts, to be paid over a specified period of time.