Which of the following would be considered "the nature of a misstatement" that might make it material?
A)Comparing the sum of known and projected misstatements to total current assets.
B)Comparing the sum of known and projected misstatements to total current liabilities.
C)Comparing the sum of known and projected misstatements to pretax income.
D)Having the effect of changing a positive earnings trend to a negative earnings trend.

Question

Quizplus · Accepted Answer

The nature of a misstatement that might make it material would be if it has the effect of changing a positive earnings trend to a negative earnings trend. This is because it can impact investors' perception of the company's financial health and future prospects. Comparing the sum of misstatements to current assets, current liabilities, or pretax income may also be useful in evaluating materiality, but it is not necessarily a definitive factor.

Which of the Following Would Be Considered "The Nature of a Misstatement