Which of the Following Is an Incorrect Statement Regarding the Allocation

question 145

Multiple Choice

Which of the following is an incorrect statement regarding the allocation of the preliminary judgment about materiality to balance sheet accounts?

• A) Auditors expect certain accounts to have more misstatements than others.
• B) The allocation has virtually no effect on audit costs because the auditor must collect sufficient appropriate audit evidence.
• C) Auditors expect to identify overstatements as well as understatements in the accounts.
• D) Relative audit costs affect the allocation.

---

Definitions:

Markdown

A reduction from the original or previous selling price of goods or services.

Breakeven

The juncture where total expenses match total income, leading to neither a net profit nor a loss.

Mark-up

A financial addition to the product's cost to cater to company overheads and profit gain.

Wholesaler

An individual or entity that buys goods in large quantities from producers to resell them to retailers or directly to customers, but typically not to the final consumer.