The auditor can assign a portion of the materiality to individual accounts in the financial statements
A)This is referred to as the auditor using professional judgment
B)This is referred to determining materiality for particular items on the financial statements
C)This is referred to as the tolerable misstatement or performance materiality for an account
D)This is referred to as the auditor obtaining reasonable assurance

Question

Quizplus · Accepted Answer

This is referred to as the tolerable misstatement or performance materiality for an account. Tolerable misstatement is the maximum error in an account balance or class of transactions that the auditor is willing to accept without modifying their opinion on the financial statements. Performance materiality is a lower amount than materiality and is used to evaluate misstatements in individual account balances or classes of transactions. By assigning a portion of materiality to individual accounts, the auditor is determining the tolerable misstatement or performance materiality for that account.

The Auditor Can Assign a Portion of the Materiality to Individual