Verizon Communications Inc. Case Summary

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Answer B: If planning an audit for Verizon Communications Inc., it is more appropriate to allocate planning materiality to the balance sheet instead of the income statement accounts because Verizon utilize a double-booking accounting system for which most of their income statement misstatements will have an equal effect on the balance sheet. Therefore, a reasonable material threshold is determinable as a percentage of total assets, total liabilities, and total equity.
Additionally, since the financial statement users are concerned with the growth of the company and its ability to generate revenue, operating income before taxes is the appropriate account to populate a materiality threshold.

Total Assets: The appropriate preliminary judgement