Answer A,B and C using the rule of thumb (auditing )

Auditors may use rules of thumb related to a financial statement base, such as net income, total revenues, or total assets, to develop these estimates of overall materiality. Rules of thumb that are commonly used in practice include: . 5 percent to 10 percent of net income before taxes. . percent to 1 percent@tal assets. percent to 1 percent of total revenues. 1 percent of total equity. The appropriate financial statement base for computing materiality will vary based on the nature of the client's business. For example, total revenues for a financial institution are often too small to use as the base in conjunction with the percentages presented above. In addition, if a company is in a near break-even position, net income for the year will be much too small to be used as the financial statement base. In that situation, the auditors will often choose another financial statement base or use an average of net income over a number of prior