Which of the Following Is Not a Qualitative Factor That

question 20

Multiple Choice

Which of the following is not a qualitative factor that may affect an auditor's establishment of materiality?

• A)Potential for fraud.
• B)The company is close to violating loan covenants.
• C)Firm policy sets materiality at 4% of pretax income.
• D)A small misstatement would interrupt an earnings trend.

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Definitions:

Energy Consumed

The total amount of energy used by a process, system, or device, typically measured in units like kilowatt-hours or joules.

First-in, First-out Method

An inventory costing method where the first items purchased or produced are the first ones sold, assuming that older inventory is sold before newer stock.

Work in Process

Partially finished goods that are in the process of being manufactured but are not yet complete.

Direct Materials

Basic substances which can be directly linked to the production process of a product.