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Hello tutors,
I don’t understand why the official answer will stated that the benchmark of the engagement is based on 1-2% of revenue, isn’t 0.5-1% only?
Thanks for answering…
The “rule of thumb” benchmark is that less than 0.5% is not material – more than 1% is material – and inbetween is the “grey area”. That doesn’t mean to say that the auditor cannot decide that less than 1% is not material – and more than 2% is material for a specific assumption – this illustrates what it means to apply professional judgment in determining materiality (!)
There is a tutorial note in the answer at the end of the materiality section:
“Tutorial note: Credit will also be awarded for justifiable alternative benchmark percentages, e.g. 0·5–1%.”
Welcome to my forum Lauren!
This post explains how to access answers in the CBE practice platform https://opentuition.com/topic/past-exam-cbe-answers – but ignore the bit about pdf answers as these are no longer available.
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