Which of the following is a correct statement regarding materiality?
A) There are well-defined guidelines that enable auditors to determine if something is material.
B) Misstatements must be compared with some benchmark before a decision can be made about the materiality level of the failure of a company to follow GAAP.
C) Pervasiveness is not considered when comparing potential misstatements with a base or benchmark.
D) To evaluate overall materiality, the auditor does not combine all unadjusted misstatements.

Question

Quizplus · Accepted Answer

Materiality is a subjective concept and misstatements must be compared with a benchmark or threshold before a decision can be made about whether they are material or not. However, there are no well-defined guidelines or specific rules that auditors follow in determining materiality. Pervasiveness is also a factor that is considered when evaluating the materiality of a misstatement. Finally, in evaluating overall materiality, the auditor must aggregate all unadjusted misstatements.

Which of the Following Is a Correct Statement Regarding Materiality