Bases are needed for evaluating materiality. If you used operating profit before income tax, what minimum percentage would you use for planning materiality?

Question

Quizplus · Accepted Answer

The selection of materiality factor is based on professional judgment and depends upon various factors such as the size and nature of the business, the level of risk involved, the expectations of the shareholders, and legal requirements. Generally, operating profit before income tax is a commonly used base for determining materiality, and a percentage of 5% is considered as the minimum threshold for planning materiality. Therefore, the best choice in this case would be option B, which represents 5%.

Bases Are Needed for Evaluating Materiality