Which of the following are examples of qualitative considerations that may cause misstatements of quantitatively immaterial amounts to be considered material?
A) The client's compliance with contractual requirements of operating or other agreements
B) Key ratios monitored by analysts or other key users of the financial report
C) Both a and b
D) None of the above

Question

Quizplus · Accepted Answer

Both options A and B can be qualitative considerations that affect the users' overall perception of the financial statements, causing them to view even immaterial misstatements as material. For example, if the client has breached a material operating agreement, it may lead analysts to question the integrity of the company's financial reporting, causing them to scrutinize even small errors more closely. Similarly, if key ratios are widely followed and relied on by analysts or other users, small immaterial errors could cause those ratios to move, leading to questioning of the financial health of the company.

Which of the Following Are Examples of Qualitative Considerations That