Which statement is true concerning materiality?
A)Misstatements are material if they could reasonably be expected to influence the decisions of users of the financial statements.
B)Materiality guidelines are specifically prescribed by the PCAOB.
C)Materiality is not a useful concept in assessing internal control effectiveness.
D)Materiality is a concept applied to financial statement presentation but not to disclosures.

Question

Quizplus · Accepted Answer

Materiality is a concept used in determining whether a misstatement in the financial statements could reasonably influence the decisions of users. It is a relative concept and depends on the size and nature of the item or error in question. PCAOB does not prescribe materiality guidelines, and materiality is also relevant in assessing internal control effectiveness. Materiality applies to both financial statement presentation and disclosures.

Which Statement Is True Concerning Materiality