Audit Standards Require the Auditor to Consider Materiality Early in the Audit

question 11

Multiple Choice

Audit standards require the auditor to consider materiality early in the audit. Which statement(s) regarding preliminary materiality is (are) true?
I. Preliminary materiality may change during the engagement.
II. Preliminary materiality is the maximum amount by which the auditor believes the financials could be misstated and still not affect the decisions of reasonable users.

• A) I only
• B) II only
• C) both I and II
• D) neither I nor II

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Definitions:

Specific Action

A particular or distinct deed or movement carried out with a purpose in mind.

Amygdala

A region of the brain involved in processing emotions such as fear, anger, and pleasure.

Recognizing Fear

The ability to identify and understand the emotion of fear in oneself or others, often as a survival mechanism.

Epinephrine

A hormone and neurotransmitter also known as adrenaline, involved in regulating visceral functions (e.g., heart rate) and in the fight-or-flight response.