Which of the following is the best definition of materiality?
A) Materiality means that the misrepresentation is large enough that users who rely on the information to make decisions may suffer financial damage.
B) Materiality means that the misrepresentation is shared in such a way as to purposely dissuade potential investors from investing in the company.
C) Materiality means that the financial statements are not misstated by enough to make a difference to those using the statements for decision making.
D) Materiality means that any misrepresentations in the financial statements are negligible in amount and should not be considered wrong by malicious intent.

Question

Quizplus · Accepted Answer

Materiality in accounting and finance refers to the significance of transactions, balances, or errors in the financial statements, such that their omission or misstatement could influence the economic decisions of users. Option A correctly captures this concept by stating that materiality involves misrepresentations large enough to potentially cause financial harm to users relying on the information for decision-making.

Which of the Following Is the Best Definition of Materiality