An auditor is determining performance materiality for the audit of a nonissuer. The auditor has established materiality for the financial statements as a whole at $500,000. The entity operates in a high-risk industry and has a history of numerous audit adjustments. Which of the following represents the MOST appropriate judgment for setting performance materiality?

Set performance materiality at $450,000 (90% of overall materiality) to minimize the risk of over-auditing.

Set performance materiality at $250,000 (50% of overall materiality) to create a safety buffer for aggregate uncorrected misstatements.

Set performance materiality at $500,000 (100% of overall materiality) because the entity is a nonissuer.

Set performance materiality at $10,000 (2% of overall materiality) to ensure all errors are found.