The first step in preliminary judgement is related to setting up a base. This base is further used to identify the quantitative judgement related to the company. After the setting up of base, the next important thing is the consideration of qualitative factors which include wrong entries in invoices or fraud related misstatement and past condition of the company in respect of misstatements (Zapparoli et al., 2017). The second step includes that the auditor should focus on the misstatements related to the summary of unadjusted errors (SUE). The third step is related to the comparison made by the auditor between the misstatement found within the company and the preliminary materiality. The auditor is required to consider the materiality of the misstatement found in the company’s financial records. If such misstatement is material for the company then the auditor is required to take an action against the company. If the misstatement is minor then in such situation, the auditor is required to make it correct with the help of the company. The preliminary judgement can be revised but this depends only on the auditor if the auditor finds any such information during the audit (Rose et al., 2017).