Misstatements Are Usually Considered Material If

question 104

Multiple Choice

Misstatements are usually considered material if:

• A) the combined uncorrected errors in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements.
• B) the auditor has quantified a measure of materiality.
• C) the combined uncorrected errors and fraud in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements.
• D) none of the above

---

Definitions:

Long-term

Pertaining to or occurring over an extended period, often exceeding one year, in the context of investments, loans, or planning.

Profit Margin

A financial ratio that measures the percentage of revenue remaining after all expenses have been deducted from sales.

Net Income

A company’s remaining income after total revenue has had taxes, expenses, and costs deducted from it.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, which may provide income through dividends.