Which of the following is an incorrect statement regarding the allocation of the preliminary judgment about materiality to balance sheet accounts?
A) Auditors expect certain accounts to have more misstatements than others.
B) The allocation has virtually no effect on audit costs because the auditor must collect sufficient appropriate audit evidence.
C) Auditors expect to identify overstatements as well as understatements in the accounts.
D) Relative audit costs affect the allocation.

Question

Quizplus · Accepted Answer

The allocation of preliminary judgment about materiality to balance sheet accounts can have an impact on audit costs. By assigning a higher materiality level to certain accounts, auditors may need to perform more detailed audit procedures on those accounts to ensure that material misstatements are not missed. Similarly, the allocation may result in fewer audit procedures being performed on accounts with a lower materiality level. Thus, the allocation of materiality can affect the overall efficiency and effectiveness of the audit, which can impact audit costs.

Which of the Following Is an Incorrect Statement Regarding the Allocation