[livealittle]

When I read the answer explanation, I’m reading the correct answer is $70,000, yet when I pick D which is $70,000 is marks it as incorrect. I typed a summary of the questions and explanations. The study guide should say D with the explanation of answer B, correct? the study guide has a mistake in it? am I right to think that?

audit question,

senior accountant is determining performance materiality for her client in Y2. She expects that there will be a high likelihood of uncorrected and undetected misstatements. guidelines advise the auditor to set performance materiality in the range of 50-70 percent of overall materiality based on the likelihood of misstatement. Auditor has calculated overall materiality at $140,000.

A $168,000
B $98,000
C $140,000
D $70,000

Explanation

Choice B is correct. $140,000 X .5 (lower range in guidance) = $70,000. Auditor believes that there is a high likelihood of uncorrected and undetected misstatements. Therefore, most likely will use a percentage closer to the lower end of the range provided in the guidance.

Choice D is incorrect. this uses the higher range in the guidance

Choice C is incorrect Materiality should be set at an amount less than the materiality for the financial statements as a whole

Choice A is incorrect. Performance materiality should not be higher than overall materiality

BEC - 8/8/16
REG - 66, 77
AUD - 81
FAR - 9/8/16