Which one of the following statements best describes the concept of materiality?
A)Materiality is determined by reference to specific quantitative guidelines established by the AICPA.
B)Materiality depends only on the dollar amount of an item relative to other items in the financial statements.
C)Materiality depends on the nature of an item but not on the dollar amount of the item.
D)Materiality is largely a matter of professional judgment.

Question

Quizplus · Accepted Answer

Materiality is largely a matter of professional judgment as it involves determining the relevance or importance of an item to users of the financial statements. While quantitative guidelines may be used as a reference, materiality is not solely based on the dollar amount of an item but also takes into consideration the nature and context of the item.

Which One of the Following Statements Best Describes the Concept