If an auditor were to use 5% of income before taxes as a basis for materiality, it would be an example of judgment based on
A)Absolute size.
B)Relative size.
C)Nature of the item.
D)Cumulative effects.

Question

Quizplus · Accepted Answer

Using a percentage of income before taxes as a basis for materiality is an example of relative size, as it considers the size of the item in relation to the financial statements as a whole.

If an Auditor Were to Use 5% of Income Before