Question

Which of the following is correct concerning the PCAOB's concept of a significant account?

A) It is the same as a relevant assertion.
B) The auditor need only consider significant accounts when controls do not operate effectively.
C) In deciding whether an account is a significant account one does not consider the effect of internal control.
D) It is an account for which qualitative materiality considerations are particularly important.

Answer 1

A significant account, according to the PCAOB, is one where qualitative materiality considerations are important, and its significance is judged based on potential impact on financial statements.

Step-by-step explanation:

The PCAOB's concept of a significant account is an account for which qualitative materiality considerations are particularly important. An account is considered significant if it has the potential to significantly impact the financial statements either due to its size or its nature. This account assessment is independent of the effectiveness of internal controls. The correct answer to the question is D) It is an account for which qualitative materiality considerations are particularly important.