The highest level of materiality exists when
A) users are likely to make incorrect decisions if they rely on the overall financial statements.
B) there has been a departure from GAAP.
C) amounts are material but do not overshadow the financial statements as a whole.
D) a scope limitation has been imposed.

Question

Quizplus · Accepted Answer

The highest level of materiality exists when users are likely to make incorrect decisions if they rely on the overall financial statements. This indicates that the misstatement or omission is significant enough to materially impact the decision-making process of the users, which is the ultimate purpose of financial statements. Materiality is a relative concept and varies based on the size and nature of the item or transaction, and the context in which it is presented. However, if a misstatement or omission is likely to have a pervasive effect on the financial statements, it is considered highly material.

The Highest Level of Materiality Exists When