What is the correct sequence of applying the five steps of materiality?
1) Estimate the combined misstatement.
2) Estimate the total misstatement in the segment.
3) Set the preliminary judgement of materiality.
4) Allocate the preliminary judgement of materiality to segments.
5) Compare the combined estimate with the preliminary judgement about materiality.
The correct sequence from start to finish would be:
A) 1 2 5 4 3.
B) 5 1 3 2 4.
C) 3 4 2 1 5.
D) 4 3 1 5 2.

Question

Quizplus · Accepted Answer

The correct sequence for applying the five steps of materiality in auditing starts with setting the preliminary judgement of materiality, then allocating this judgement to segments, estimating the total misstatement in the segment, estimating the combined misstatement, and finally comparing the combined estimate with the preliminary judgement about materiality.

What Is the Correct Sequence of Applying the Five Steps