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:

Type I Error

The statistical error that occurs when the null hypothesis is incorrectly rejected when it is actually true.

Type II Error

The error of failing to reject a false null hypothesis, also known as a false negative error.

Test Power

The probability that a statistical test will reject a false null hypothesis, a measure of a test’s effectiveness.

Sample Size

The number of observations or units included in a sample, which can influence the reliability and validity of statistical results.