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:

Market Value

The present rate at which a service or asset is available for purchase or sale.

Net Income

Net income is the total amount of profit a company earns after subtracting all of its expenses, taxes, and costs from its total revenue.

Unlimited Liability

A legal structure in business where owners are personally liable for all the debts and obligations of the business.

Limited Life

A term that refers to the finite operational lifespan of an entity, asset, or agreement, after which it ceases to exist or operate.