Materiality should be adjusted for the effect of net anticipated misstatements to determine performance materiality available for
A) identified misstatements.
B) likely misstatements.
C) unanticipated misstatements.
D) further possible misstatements.

Question

Quizplus · Accepted Answer

Performance materiality is the amount set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. In determining performance materiality, the auditor should take into account the effect of identified and likely misstatements on the audit, but not further possible misstatements. However, the auditor should adjust performance materiality for the effect of unanticipated misstatements, which are misstatements that are not identified by the auditor's risk assessment procedures. Therefore, materiality should be adjusted for the effect of net anticipated misstatements to determine performance materiality available for unanticipated misstatements.

Materiality Should Be Adjusted for the Effect of Net Anticipated