Misstatements must be compared with some measurement base before a decision can be made about materiality. A commonly accepted measurement base includes
A) net income.
B) total assets.
C) working capital.
D) all of the above.

Question

Quizplus · Accepted Answer

All of the above (net income, total assets, and working capital) are commonly accepted measurement bases for assessing materiality. Depending on the nature of the misstatement and the specific circumstances of the entity, any or all of these measures may be relevant in determining whether a misstatement is material. For example, a misstatement that affects net income by a small amount may not be material if the company has large total assets and a significant amount of working capital. Therefore, using multiple measures can provide a more comprehensive view of the potential impact of a misstatement.

Misstatements Must Be Compared with Some Measurement Base Before a Decision