Which of the Following Is the Most Important Qualitative Factor

question 72

Multiple Choice

Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments?

• A)A misstatement exceeded five percent of net income.
• B)The auditor also provides consulting services to the audit client.
• C)The misstatement will cause the client to fail to meet an earnings forecast.
• D)The audit committee is not well-educated about the accounting principle in question.

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Definitions:

LIFO Inventory Method

An inventory valuation method that assumes the last items placed in inventory are the first sold during an accounting period; stands for Last-In, First-Out.

Inventory Costing Methods

Techniques used to assign costs to inventory items, such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and weighted average cost.

Gross Profit

The difference between revenue from sales and the cost of goods sold, before accounting for selling, general, and administrative expenses.