In Planning the Audit, the Auditor Should Assess Materiality at Two

question 46

Multiple Choice

In planning the audit, the auditor should assess materiality at two levels:

• A) the preliminary level and the final level.
• B) the company level and the divisional level.
• C) the account balance level and the detailed item level.
• D) the financial statement level and the account balance level.
• E) the account balance level and the transaction level.

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Definitions:

Financial Accounting

The field of accounting focused on the preparation of financial statements for external users, such as investors, creditors, and regulatory agencies.

Economic Events

Economic events are transactions or occurrences that affect the financial position of an entity and can be reliably measured.

Period Cost

Expenses that are not directly tied to the production process and are instead accounted for in the period they occur.

Product Cost

The total of costs directly assigned to the production of goods sold by a company, including materials, labor, and overhead.