Which of the following statements is true concerning the allocation of preliminary materiality?
A) It is necessary to allocate preliminary materiality to financial statements as a whole rather than by segments.
B) Preliminary materiality should be allocated to income statement accounts only.
C) Preliminary materiality is required by the SEC.
D) The PCAOB term used when preliminary materiality is allocated to segments is tolerable misstatement.

Question

Quizplus · Accepted Answer

The PCAOB uses the term "tolerable misstatement" to refer to the allocation of preliminary materiality to segments of an audit, such as specific accounts or disclosures, to help in planning and performing the audit. This concept is part of the risk assessment process in auditing, allowing auditors to determine the nature, timing, and extent of further audit procedures.

Which of the Following Statements Is True Concerning the Allocation