Often in an Audit, Total Combined Tolerable Misstatement Is Greater

question 71

Essay

Often in an audit, total combined tolerable misstatement is greater than overall materiality. Why is this the case?

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Definitions:

Dividend Payout Ratios

The fraction of earnings paid to shareholders in dividends, usually expressed as a percentage.

Pretax Cost of Debt

The rate of interest a company pays on its borrowings before tax adjustments, often used in calculating the cost of capital for a company.

Retained Earnings

Profits that a company has kept or retained rather than paid out as dividends.

Cost Estimate

An approximation of the costs associated with completing a project, task, or transaction, often used in budgeting and planning.