Question

Auditors must use their professional judgment _______.

A) To distinguish if a misstatement or scope limitation is just material or pervasively material
B) To distinguish if a misstatement or scope limitation is just immaterial or pervasively material
C) To determine if the firm has the ability to pay the auditor for services rendered
D) In selecting the client's audit committee.

Answer 1

Auditors use professional judgment to determine if misstatements or scope limitations in financial statements are material or pervasively material, which influences the reliability of financial information.

Step-by-step explanation:

Auditors must use their professional judgment A) To distinguish if a misstatement or scope limitation is just material or pervasively material. In the context of auditing, professional judgment is essential to making determinations about the significance of issues identified during the audit process. When auditors are evaluating financial statements, they must assess whether inconsistencies or omissions are material, meaning they are likely to influence the economic decisions of users, or pervasively material, which indicates that the misstatement or omission fundamentally undermines the financial statements as a whole.