Which of the Following Is a Correct Statement Regarding Materiality

question 78

Multiple Choice

Which of the following is a correct statement regarding materiality?

• A) There are well-defined guidelines that enable auditors to determine if something is material.
• B) Misstatements must be compared with some benchmark before a decision can be made about the materiality level of the failure of a company to follow GAAP.
• C) Pervasiveness is not considered when comparing potential misstatements with a base or benchmark.
• D) To evaluate overall materiality, the auditor does not combine all unadjusted misstatements.

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Definitions:

Supply Rooms

Rooms or spaces designated for the storage of supplies, equipment, and materials necessary for the operation of a business or organization.

Legal Consequences

The outcomes or effects that arise from the application of law, including penalties, obligations, or rights that result from lawful or unlawful actions.

Unjust Enrichment

Refers to a situation where one party unfairly benefits at another's expense and is legally required to compensate the victim to correct the imbalance.

Implied Covenant

An unstated promise or clause in a contract, inferred by law to promote fairness and uphold the contract’s spirit.