Each of the following questions concerns the concept of materiality in auditing:

a. What criteria should the auditor use in deciding whether an estimated error in inventory, based on a sample, is sufficiently material to require an adjustment to the financial statements ?

b. What criteria should the auditor use in deciding whether an account balance is sufficiently immaterial to justify performing minimal tests rather than extensive audit procedures? Using your criteria, state the conditions when extensive audit procedures are required for cash in the bank, federal income taxes payable, petty cash, and unexpired insurance.

c. Assume the auditor has decided to perform no detailed tests of factory supplies on hand in the audit of a manufacturing company. List the overall reasonableness tests the auditor should use.