The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include
A)misstatements that change income into a loss
B)the effect of the misstatement on compliance with loan covenants,contractual agreements and regulatory provisions
C)the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels
D)misstatements that have the effect of increasing employees compensation
E)the effect of misclassifying income between operating and nonrecurring
F)both A and B
G)both B and C
H)both D and E

Question

Quizplus · Accepted Answer

The best choice is G, as it accurately captures circumstances that could cause quantitatively immaterial misstatements to be judged material. Both Option B (the effect of the misstatement on compliance with loan covenants, contractual agreements, and regulatory provisions) and Option C (the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels) are valid reasons for misstatements to be considered material, even if they are not quantitatively significant.

The Auditing Standards Have Listed Several Circumstances That Might Cause