When allocating performance materiality:
A)it is easy to predict in advance which accounts are mot likely to be misstated.
B)only overstatements need to be considered.
C)professional judgment is critical.
D)the sum of all the performance materiality levels cannot exceed the preliminary judgment about materiality.

Question

Quizplus · Accepted Answer

Allocating performance materiality requires professional judgment as it involves considering the risk of material misstatement in each account and determining an appropriate level of materiality that can be applied to individual account balances or transactions. The auditor needs to consider both overstatements and understatements while determining performance materiality. Additionally, the sum of all performance materiality levels should not exceed the overall preliminary judgment about materiality.

When Allocating Performance Materiality