Answer the following questions:

(i) State one qualitative factor that could influence the auditor's determination of materiality.(1 Mark)

(ii)Consider ASA 320 and, with reference to the appropriate paragraph of that auditing standard, briefly outline, the factors that that may influence the auditor's choice of a benchmark when determining materiality for the financial report as a whole.(5 Marks)

(iii)Is the following statement True or False?(1 Mark)

When planning an audit, an auditor will set a lower level of materiality when audit risk is assessed as medium than when it is assessed as low.

(iv)For each of the following independent situations state whether the auditor would increase or decrease materiality.(2 Marks)

Situation

1

This is the third year of the audit of Wool Pty Ltd. Few problems were encountered in the last two years and the audit proceeded ahead of time and well within budget. Trading conditions for Wool Pty Ltd remain stable

2

Orange Ltd is in the fashion industry. In the past twelve months competition from importers has increased and consumer confidence has decreased.