5. Holding everything else constant, as the auditor's evaluation of materiality obtain a more precise conclusion about the financial statements. The, cause the auditor to perform more extensive audit procedures. A decreases, increased B. increases, decreased C. increases, increased D. decreases, decreased , the auditor is looking to precision of the audit will 6. Martin Inc. is being audited by the firm MNE and Associates. MNE's auditors decide that $100 million is the planning materiality and $50 million is the appropriate performance materiality at the account level. If all of Martin's account balances are below $50 million, the auditors will: A. still perform some audit procedures on the account because the immaterial misstatements can be material in aggregate. B. perform detailed audit procedures on the accounts because the sum of Martin's accounts is greater than $50 million. C. end audit procedures, both detailed and on controls, because performance materiality has reduced the probability that the sum of immaterial and/or undetected misstatements in the financial statements is less than materiality for the financial statements as a whole. D. check the auditing standard guidelines for the determination of performance materiality. 7. While reviewing the financial statements of a potential new audit client, Ken, the senior audit partner and owner of Leonard's CPA Firm has noted that the client has a contingent liability recorded on the balance sheet for a relatively insignificant dollar amount. Ken proceeds to check the accompanying note to the financial statements which advises the amount is to retain the services of a specialist law firm who believe this may become a class action lawsuit. Based on this information, it could be said that A. as no litigation has been filed at present, there is no need to record a liability of any kind or accompanying note in the financial statements. B. although the amount may be quantitatively immaterial at present, the qualitative indicator of a potential class action lawsuit is enough to warrant its recording in the financial statements. C. the client's best course of action is to immediately notify the Securities and Exchange Commission of the possible litigation. D. even a quantitatively immaterial amount should still be recorded in the client's financial statements, regardless of whether or not a qualitative element exists. 8. Lucky Auditing Firm is completing the external audit of Starmount LLC, an international provider of telecommunications and videoconferencing equipment. Lucky Auditing Firm has observed over the last few years of the audit how quickly the client's industry appears to change. With this in mind, which of the following statements is most accurate? A. Once the current year's audit is over, the external auditing firm should consider not accepting any future engagements due to the increased audit risk associated with rapidly changing industries. B. Rapid technological developments in the client's industry are likely to increase inherent risk, which may also increase audit risk and impact detection risk. C. Any rapidly changing industry represents an increased likelihood of fraud. It is prudent for the auditor to avoid such industries. D. It is likely that due to the rapidly changing industry, the subjectivity of accounting estimates has increased, decreasing audit risk and increasing the risk of material misstatement.