Audit standards require the auditor to consider materiality early in the audit. Which statement(s) regarding preliminary materiality is (are) true?
I. Preliminary materiality may change during the engagement.
II. Preliminary materiality is the maximum amount by which the auditor believes the financials could be misstated and still not affect the decisions of reasonable users.
A) I only
B) II only
C) both I and II
D) neither I nor II

Question

Quizplus · Accepted Answer

I is true because preliminary materiality is an initial determination and may need to be adjusted as the audit progresses and more information is gathered. 
II is also true because preliminary materiality is the maximum threshold under which misstatements and errors may be considered immaterial to the financial statements’ users.

Audit Standards Require the Auditor to Consider Materiality Early in the Audit