1. Which of the following statements are true about materiality? Choose all that apply.

A. Planning materiality is used to guide audit testing.

B. If audit risk is high, the audit should use a lower planning materiality.

C. Information is considered material if it affects the decisions of the users of the financial statements.

D. Materiality is a simple mathematical calculation.

E. There are different levels of materiality the auditor should consider.

F. A small dollar fraud is not material as it would not change a user's decision.

G. The primary consideration in selecting a base should be the financial statement users' needs.

2. Materiality is an important aspect of any audit. Which of the following statements are accurate? (Several choices may be correct.)

a) Materiality is determined during the execution phase of the audit

b) The higher the materiality the more work that is required

c) Materiality is determined based on the level of audit risk

d) The lower the materiality, the more work that is required

e) Materiality is used to guide the planning of the audit

3. With a newly established business, what would most likely be the most appropriate base number when determining materiality?

a) Total revenue

b) Profit before tax

c) Total assets

d) Total liabilities