The Auditor Has Set Materiality at XYZ Company of $50

question 22

Multiple Choice

The auditor has set materiality at XYZ Company of $50 000 based upon a percentage of net assets.The company currently has a small profit (only $3500) .Which of the following items would the auditor most likely consider to be material and request an account balance adjustment?

• A)a misclassification between accounts receivable and accounts payable of $10 000
• B)incorrect allocation of a note payable to current rather than long term
• C)poor wording in a note to the financial statements,making it a bit difficult to understand
• D)an understatement of depreciation expense,which would increase depreciation by $5000