The Concept of Materiality Would Be Least Important to an Auditor

question 684

Multiple Choice

The concept of materiality would be least important to an auditor when considering the:

• A) Adequacy of disclosure of a client's illegal act.
• B) Discovery of weaknesses in a client's internal control.
• C) Effects of a direct financial interest in the client on the CPA's independence.
• D) Decision whether to use positive or negative confirmations of accounts receivable.

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Definitions:

Pessimistic Situation

A scenario or outlook where the worst possible outcomes are anticipated, often used in risk management or scenario planning.

Accounting Basis

The method by which revenues and expenses are recorded and recognized in financial statements, such as cash basis or accrual basis.

Rate of Return

The profit or deficit incurred on an investment during a designated time, shown as a fraction of the initial investment amount.

Net Income

The profit of a company after all expenses and taxes have been deducted from revenue.