In Considering Materiality for Planning Purposes, an Auditor Believes That

question 22

Multiple Choice

In considering materiality for planning purposes, an auditor believes that misstatements aggregating $10 000 would have a material effect on an entity's income statement, but that misstatements would have to aggregate $20 000 to materially affect the statement of financial position. Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate:

• A) $10 000.
• B) $15 000.
• C) $20 000.
• D) $30 000.

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Definitions:

Reported Yield

The interest or dividends received from an investment, expressed as a percentage of the investment's current market value.

Required Return

The minimum rate of return an investor expects to achieve from an investment, considering its risk.

Expected Dividend

The forecasted payment of profits by a corporation to its shareholders, usually announced by the company's board of directors.