Select the incorrect statement regarding the analysis of absolute amounts of various accounts reported on the financial statements.
A)To fully appreciate an absolute amount,the analyst must consider the size of other accounts of the business.
B)Using absolute amounts eliminates the problem of varying materiality levels.
C)Economic statistics such as the gross national product are built upon totals of absolute amounts reported by businesses.
D)Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area.

Question

Quizplus · Accepted Answer

Using absolute amounts does not eliminate the problem of varying materiality levels. Even if an account has a larger absolute amount, it may not be as significant as another account with a smaller absolute amount but a higher materiality level. Materiality is a concept that analysts should consider to determine whether an account's absolute amount is important or not.

Select the Incorrect Statement Regarding the Analysis of Absolute Amounts