Lewis Corporation has a few large accounts receivable that total one million dollars whereas
Clark Corporation has many small accounts receivable that total one million dollars. Misstatement in any one account is more significant for Lewis corporation because of the concept of:
A) Materiality.
B) Audit risk.
C) Reasonable assurance.
D) Comparative analysis.

Question

Quizplus · Accepted Answer

Materiality is the concept that misstatements or errors that have a significant impact on the financial statements should be considered during the audit process. In this case, the larger accounts receivable for Lewis Corporation would have a more significant impact if there were any misstatements, making materiality more of a concern for them. Clark Corporation's many smaller accounts receivable may have less impact individually, but collectively could still be material as a group.

Lewis Corporation Has a Few Large Accounts Receivable That Total