A misstatement in the financial statements can be considered material if
A)it overshadows the financial statements as a whole.
B)knowledge of the misstatement would affect the decision of a reasonable user of the financial statements.
C)it affects more than one account on the financial statements.
D)it affects only one account on the financial statements.

Question

Quizplus · Accepted Answer

A misstatement in the financial statements can be considered material if knowledge of the misstatement would affect the decision of a reasonable user of the financial statements. Materiality is based on the nature and size of the misstatement, and whether it would influence the economic decisions of users of the financial statements. The fact that it overshadows the financial statements as a whole or affects more than one account does not necessarily determine materiality. A misstatement in only one account can still be considered material if it has a significant impact on the financial statements.

A Misstatement in the Financial Statements Can Be Considered Material