The Threshold of Materiality May Be Lowered in the Case

question 42

Multiple Choice

The threshold of materiality may be lowered in the case of potential fraud in the financial statements under audit.Why is this different from the usual materiality levels set by auditors?

• A)The intentional act of committing fraud itself becomes material,regardless of dollar amounts.
• B)Fraud is not relative to internal control,which requires larger materiality limits.
• C)The act of fraud is a characteristic of certain types of managers,therefore,materiality is irrelevant.
• D)Normal audit procedures are designed to catch all fraud,even the smallest of infractions.

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Definitions:

Indonesia

A Southeast Asian country consisting of thousands of volcanic islands, known for its diverse cultures, languages, and ecosystems.

Pyroclastic Flow

A fast-moving current of hot gas and volcanic materials (such as ash and rock fragments) that flows down the side of a volcano during an explosive eruption.

Mudflows

Fast-moving rivers of mud, usually triggered by heavy rainfall or volcanic activity, capable of causing significant damage.

Landslides

The rapid movement of a large amount of earth material, such as rock or soil, down a slope, often triggered by rain or earthquakes.