When a client has significant and nonrecurring charges to nonoperating expenses, which of the following would be the most appropriate materiality benchmark?
A) Net profit.
B) Income from continuing operations.
C) Cash inflows.
D) Cash outflows.

Question

Quizplus · Accepted Answer

Income from continuing operations measures the company's ongoing profitability and excludes one-time or nonrecurring charges, making it a more appropriate benchmark when a client has significant and nonrecurring charges to nonoperating expenses. Net profit and cash inflows/outflows may be affected by a variety of factors, which could obscure the impact of nonrecurring charges.

When a Client Has Significant and Nonrecurring Charges to Nonoperating