Since materiality is relative, it is necessary to have bases for establishing whether misstatements are material. Normally, the most common base for deciding materiality is:
A) total assets.
B) net income after taxes.
C) net working capital.
D) net income before taxes.

Question

Quizplus · Accepted Answer

Net income before taxes is often used as a base for determining materiality because it reflects the company's profitability and is a key indicator of financial performance.

Since Materiality Is Relative, It Is Necessary to Have Bases