Performance materiality as set by the auditor:
A) does not affect inherent or control risks.
B) increases inherent risk only.
C) increases control risk only.
D) increases inherent risk and control risk.

Question

Quizplus · Accepted Answer

Performance materiality is a concept used by auditors to determine the amount by which financial statements can be misstated without affecting the decisions of reasonable users. It is related to the planning and execution of an audit, and does not directly affect the assessment of inherent or control risks, which are characteristics of the audited entity's environment and systems.

Performance Materiality as Set by the Auditor