Response to the following questions:
1. What are the three general types of audit tests? Define each type of audit test and give two examples.
2. Why is it important for CPA firms to develop policies and procedures for establishing materiality?
3. List and describe the three major steps in applying materiality to an audit.
4. While net income before taxes is frequently used for calculating overall materiality, discuss circumstances when total assets or revenues might be better bases for calculating overall materiality.