The Auditor's Preliminary Judgment About Materiality Cannot Be Made Before

question 4

True/False

The auditor's preliminary judgment about materiality cannot be made before the financial statement date, when annual amounts become known.

---

Definitions:

Investment

The allocation of resources, usually financial, in expectation of future returns, such as income or capital gains.

Nominal Interest Rate

The stated interest rate on a loan or investment, not adjusted for inflation.

Inflation Rate

The rate expressed in percentage terms by which the overall price level of goods and services increases, leading to a decrease in purchasing power.

Real Rate of Interest

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the real yield to lenders.