Material Misstatement Is the Magnitude of Misstatement That Makes a Reasonable

question 88

Essay

Material misstatement is the magnitude of misstatement that makes a reasonable person either change their mind or be influenced by the misstatement. Audit standards require the auditor to consider the combined amount of misstatement early in the audit. This is known as preliminary materiality judgment. List and discuss the three main factors that affect an auditor's preliminary judgment about materiality.

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Definitions:

Hourly Price

A pricing method where goods, services, or labor are priced per hour, commonly used in billing for professional services or wages for hourly employees.

Wage Rate

The amount of money paid to a worker per unit of time, often an hour or a year.

Alternative Technologies

Different methods or innovations that can be employed to achieve the same or improved outcomes in production or services.

Isocost Line

A graph that shows all the combinations of capital and labor available for a given total cost.