What Is the Correct Sequence of Applying the Five Steps

question 31

Multiple Choice

What is the correct sequence of applying the five steps of materiality?
1) Estimate the combined misstatement.
2) Estimate the total misstatement in the segment.
3) Set the preliminary judgement of materiality.
4) Allocate the preliminary judgement of materiality to segments.
5) Compare the combined estimate with the preliminary judgement about materiality.
The correct sequence from start to finish would be:

• A) 1 2 5 4 3.
• B) 5 1 3 2 4.
• C) 3 4 2 1 5.
• D) 4 3 1 5 2.

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Definitions:

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