Qualitative Factors Can Affect an Auditor's Assessment of Materiality

question 58

Multiple Choice

Qualitative factors can affect an auditor's assessment of materiality. Which of the following qualitative factors could influence the assessment of materiality?
I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.
II. Minor misstatements resulting from the consequences of contractual obligations.

• A) I only
• B) II only
• C) I and II
• D) neither I nor II

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Definitions:

Business Firms

Organizations involved in the production, distribution, or sale of goods and services for profit.

Large Firms

Companies that operate on a large scale, often having significant market power, extensive operations, and substantial revenues.

Collusion

An agreement between two or more parties, often competitors, to limit competition and manipulate prices or terms of trade to their advantage.

Industry

A group of companies or organizations involved in the production or supply of goods and services in a particular area of the economy.