1. Certain accounts and transactions affect both the Income Statement and the Balance Sheet. If $20,000 is considered to be material to the income statement, but $15,000 is material to the balance sheet, the auditor should set overall materiality at which of the following dollar amounts?

a. $10,000 c. $20,000

b. 15,000 d. 35,000

2. Consider the following statements:

I. Clearly trivial and not material are terms that can be used interchangeably.

II. The lower the dollar amount of (performance) materiality the less audit evidence is required.

a. I is true; II is true

b. I is true; II is false

c. I is false; II is true

d. I is false; II is false

3. Consider the following statements:

I. Per auditing standards, the predecessor [old] audit firm is required to initiate communication

with the successor [new] audit firm.

II. The predecessor auditor might communicate, to the successor auditor, information related to

client managements integrity.

a. I is true; II is true

b. I is true; II is false

c. I is false; II is true

d. I is false; II is false

4. As materiality goes down, the amount of desired audit evidence:

a. Goes down.

b. Goes up.

c. Stays the same.

e. None of the above. The answer is _____