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.

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Definitions:

Economic Reform

The implementation of policy changes aimed at improving a country's economic efficiency, often through measures such as deregulation, reduction of corruption, tax reform, and encouraging private sector growth.

Mikhail Gorbachev

A former Soviet statesman who served as the last leader of the Soviet Union, known for his policies of glasnost (openness) and perestroika (restructuring) which led to the end of the Cold War.

Soviet Union

A socialist state that existed from 1922 to 1991, consisting of multiple republics, and was a major global power, eventually disbanding and leading to the rise of independent nations, including Russia.

Second Gilded Age

A term used to describe a period of extreme wealth and economic inequality in the United States, reminiscent of the Gilded Age of the late 19th century but occurring in the late 20th and early 21st centuries.