The primary concern in measuring materiality when a client has failed to follow an accounting standard is usually:
A) measurability of the dollar error.
B) the total dollar error in the accounts involved, compared with some base.
C) the nature of the item in error.
D) whether it can materially affect some future period.

Question

Quizplus · Accepted Answer

When a client has failed to follow an accounting standard, the primary concern in measuring materiality is usually the total dollar error in the accounts involved, compared with some base. This is because the failure to follow an accounting standard affects not only the individual accounts involved but also the overall financial statements. Thus, it is important to determine the total dollar error in order to assess the impact on the financial statements as a whole. Measurability of the dollar error and the nature of the item in error may also be considered when determining materiality, but the total dollar error is usually the primary concern. Whether the error can materially affect some future period is not as important as the impact on the current financial statements.

The Primary Concern in Measuring Materiality When a Client Has