Misstatements are usually considered material if:
A) the combined uncorrected errors in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements.
B) the auditor has quantified a measure of materiality.
C) the combined uncorrected errors and fraud in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements.
D) none of the above

Question

Quizplus · Accepted Answer

Materiality is based on the effect the misstatement could have on the decisions of a reasonable person using the financial statements. If the combined uncorrected errors are likely to change or influence those decisions, then the misstatement is considered material. The quantification of materiality is a separate process used by the auditor to judge the significance of misstatements in relation to the financial statements as a whole. Fraud is also considered in the assessment of materiality, but is not required for a misstatement to be considered material.

Misstatements Are Usually Considered Material If