Which of the Following Statements About Materiality Is Incorrect

question 63

Multiple Choice

Which of the following statements about materiality is incorrect?

• A) The preliminary assessment of materiality guides audit planning and testing.
• B) Materiality is used to guide the validity of information contained in the financial statements.
• C) Materiality is a key auditing concept that is assessed during the risk assessment phase of every audit.
• D) Information is considered material if it has no impact on the decision-making process of financial statement users.

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Definitions:

Process Costing System

A process costing system assigns costs to masses of similar units, making it an effective method for organizations that produce goods in continuous processes, like chemicals or fuel.

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the expenses incurred to convert raw materials into finished goods.

Process

A sequence of activities linked together for performing a particular task.

Perpetual Inventory Accounts

An inventory system that continuously keeps track of inventory levels and costs, updating the accounts after each purchase or sale.