When planning an audit, the auditor should consider the concept of 'materiality' for the financial statements as a whole. Which of the following is the primary benchmark generally used for a profit-oriented entity?

Answer options:

Total assets.

Total revenue.

Income before taxes.

Retained earnings.

How to approach this question

Identify the primary user focus for a for-profit company (Earnings).

Full Answer

C.Income before taxes.✓ Correct

For profit-oriented entities, income before taxes (continuing operations) is generally considered the most relevant benchmark for users of financial statements.

Common mistakes

Selecting Revenue or Assets (which are secondary or industry-specific benchmarks).

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