If an Auditor Were to Use 5% of Income Before

question 25

Multiple Choice

If an auditor were to use 5% of income before taxes as a basis for materiality,it would be an example of judgment based on ________.

• A)absolute size
• B)relative size
• C)nature of the item
• D)cumulative effects

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Definitions:

Silence Acceptance

The concept that silence can be interpreted as acceptance of an offer under certain conditions in contract law.

Binding Contract

A legally binding contract between two or more parties that can be upheld in court.

Formal Written Agreement

A legally binding contract that is documented in writing and signed by all parties involved.

Implied Acceptance

An agreement to the terms of a contract demonstrated through actions or behaviors, rather than explicitly communicated through words.