An item with a "psychological" effect (e.g., where the item maintains an increasing earnings trend) is a qualitative factor that may affect the auditor's decision regarding materiality.

Question

Quizplus · Accepted Answer

A psychological effect, such as an increasing earnings trend, may influence the auditor's assessment of materiality by affecting their judgment of the financial statement users' perception of the financial information. However, it is important to note that materiality is ultimately determined by quantitative factors, such as percentages and dollar amounts, and not solely based on qualitative factors.

An Item with a "Psychological" Effect (E