If an Auditor Were to Use 5% of Income Before

question 2

Multiple Choice

If an auditor were to use 5% of income before taxes as a basis for materiality, it would be an example of judgment based on

• A)Absolute size.
• B)Relative size.
• C)Nature of the item.
• D)Cumulative effects.

---

Definitions:

E-money Transactions

Financial transactions carried out electronically, using digital currencies or electronic substitutes for cash.

Electronic Fund Transfer Act

A US federal law designed to protect consumers engaging in electronic transfers, including ATM transactions, direct deposits, and other electronic payments.

Commercial

Related to the buying and selling of goods and services or to business activities in general.

Consumer

An individual who purchases goods or services for personal use rather than for manufacturing or resale.