Often, There Is a Large Number of Immaterial Errors Discovered

question 29

Multiple Choice

Often, there is a large number of immaterial errors discovered that do not require an adjustment at the time they are found.

• A) Since there are a large number of these, the auditor would recommend adjusting entries to the client.
• B) The auditor would never combine these individually immaterial amounts because that would mix dissimilar data.
• C) Since these items are individually immaterial, the auditor would not recommend adjusting entries to the client.
• D) The auditor must combine the individually immaterial errors and evaluate whether the combined amount is material.

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Definitions:

Fixed Costs

Expenditures that do not vary with the degree of output or sales, for instance, rental fees, wages, and insurance premiums.

Break-Even Point

The point at which total costs and total revenues are equal, meaning a business is not making a profit but also not incurring a loss.

Margin of Safety

The difference between actual or projected sales and the break-even sales level, used to assess risk and financial stability.

Variable Costs

Financial outlays that adjust based on the quantity of products made or the scale of sales transactions.