Qualitative Factors Can Affect an Auditor's Assessment of Materiality

question 97

Multiple Choice

Qualitative factors can affect an auditor's assessment of materiality. Which of the following statements is true?
I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.
II. Misstatements that are otherwise minor may be material if there are possible consequences arising from contractual obligations.

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

Comprehend the accounting treatment for restricted funds and endowments.

Know the differences in accounting treatments for capital and operational contributions.

Understand the accounting for volunteer services and donated assets.

Comprehend the encumbrance system for recording obligations.

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Definitions:

Procedural Conflict

A disagreement among team or organization members about the methods or processes used to achieve goals.

Distributive Negotiation

A negotiation approach focused on dividing a limited amount of resources, often leading to win-lose outcomes.

Integrative Negotiation

A negotiation strategy where parties collaborate to find a "win-win" solution that offers mutual benefits.

Hard Negotiation

A negotiation strategy that involves assertiveness and an unwillingness to make concessions, focusing on winning as much as possible.