Which of the Following Statements Is Correct Regarding the Auditor's

question 77

Multiple Choice

Which of the following statements is correct regarding the auditor's determination of materiality?

• A) The planning level of materiality should normally be the larger of the amount considered for the balance sheet versus the income statement.
• B) The auditors' planning level of materiality may be disaggregated into smaller "tolerable misstatements" for the various accounts.
• C) Auditors may use various rules of thumb to arrive at an evaluation level of materiality, but not for determining the planning level of materiality.
• D) The amount used for the planning should equal that used for evaluation.

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Definitions:

Cost of Goods Sold

The total cost of manufacturing or acquiring a product that is sold to customers, including materials and labor but not distribution or sales costs.

Selling Expenses

Costs incurred directly related to the selling of a product or service, including advertising, sales salaries, and commission.

Period Costs

Expenses incurred that are not directly tied to production activities, such as administrative and selling expenses, and are charged to the period in which they arise.

Factory Supervisor

An individual responsible for overseeing the daily operations, personnel, and production processes in a factory or manufacturing plant.