Which of the following is not a concern as to whether a misstatement is qualitatively material?
A)The misstatement hides a failure to meet analysts' expectations.
B)The misstatement is less than 5% of pretax income.
C)The misstatement increases management's compensation.
D)The misstatement changes a small amount of profit to a small reported loss.

Question

Which of the following is not a concern as to whether a misstatement is qualitatively material? 
A)The misstatement hides a failure to meet analysts' expectations.
B)The misstatement is less than 5% of pretax income.
C)The misstatement increases management's compensation.
D)The misstatement changes a small amount of profit to a small reported loss.

Quizplus · Accepted Answer

The materiality of a misstatement is not solely determined by the size of the misstatement in relation to pretax income. Other factors such as the impact on users' decisions and perceptions, nature of the misstatement, and intent of management are also relevant. In this case, hiding a failure to meet analysts' expectations (A), increasing management's compensation (C), and changing a small amount of profit to a small reported loss (D) could potentially be material factors that affect users' decisions and perceptions.

Which of the Following Is Not a Concern as to Whether