When Determining Materiality

question 35

Multiple Choice

When determining materiality,

• A) the preliminary judgment about materiality can be increased, but not decreased during the audit.
• B) auditing standards provide specific materiality guidelines to practitioners.
• C) only one benchmark can be used.
• D) the application of guidelines requires considerable professional judgment.

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Definitions:

Inelastic

Characterizes a condition where a change in price leads to a relatively small change in the quantity demanded or supplied.

Price Elasticity of Demand

The responsiveness of the quantity demanded of a good to a change in its price, with all other factors being held constant.

Elastic

Describes a situation where the demand for a product significantly changes in response to changes in its price.

Absolute Value

A numerical value regardless of its sign, often represented as the distance of a number from zero on the numerical scale.