In planning the audit,the auditor makes decisions about the size of misstatements that will be considered material.These decisions allow the auditor to
A)determine the nature,timing,and extent of inherent risk assessment procedures
B)identify and assess the risk of material misstatement
C)determine the nature,timing,and extent of internal control procedures
D)establish an amount below which misstatements will always be evaluated as immaterial

Question

Quizplus · Accepted Answer

When the auditor determines the size of misstatements that will be considered material, they are essentially identifying the level of risk of material misstatement. This allows the auditor to plan their audit procedures accordingly, including the nature and extent of audit procedures needed to properly address these risks. Option A pertains to inherent risk, which is assessed prior to determining materiality, while Option C refers to testing of internal controls and is a separate part of the audit process. Option D is incorrect as the auditor needs to use their professional judgement to determine if misstatements are material, and cannot rely solely on a predetermined threshold.

In Planning the Audit,the Auditor Makes Decisions About the Size