Choice "B" is correct. When obtaining specific written client representations, an auditor would not apply materiality limits to fraud involving employees with significant roles in the internal control structure, because even fraud that causes an immaterial effect on the financial statements may have serious implications with respect to the integrity of the employees involved.
Choice "c" is incorrect. An auditor would apply materiality limits when obtaining specific written client representations pertaining to disclosure of compensating balance arrangements involving restrictions on cash balances, because immaterial amounts need not be considered.
Choice "a" is incorrect. An auditor would apply materiality limits when determining assumptions that must be disclosed regarding accounting estimates. Specifically, all material assumptions that are used in accounting estimates must be disclosed, while all insignificant assumptions need not be disclosed.
Choice "d" is incorrect. An auditor would apply materiality limits when obtaining specific written client representations pertaining to the absence of errors and unrecorded transactions in the financial statements, because immaterial amounts need not be considered.