Allocating the preliminary judgement about materiality to segments of the financial statements is necessary because:

Question

Quizplus · Accepted Answer

Materiality can vary for different segments of the financial statements such as revenue, expenses or assets, and liabilities. Therefore, it is necessary to allocate the preliminary judgement about materiality to segments of the financial statements rather than treating them as a whole. This helps auditors to focus on high-risk areas and allocate resources accordingly. Option A is incorrect because materiality always applies to the financial statements as a whole, irrespective of the segment. Option B and C are incorrect because the allocation of preliminary judgement about materiality is not a requirement of the Code of Professional Conduct or the Corporations Act.

Allocating the Preliminary Judgement About Materiality to Segments of the Financial