Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 3

Comment on the statement that materiality is in the eye of the beholder. How does this statement relate to the discussion in the chapter of how to gauge materiality in assessing financial statement restatements.

Step 1 of 2

Concept of materiality:

The concept of materiality is defined as a measurement of an item that influences the decision of the users of the financial statement. It is the situation where the financial information of the organization is considered to be material, from the point of view to prepare the income statement and the balance sheet. This financial information influences the judgment and the knowledge of the person to capture that financial information in the books of account.