Which of the Following Statements Is Not Correct About Materiality

question 511

Multiple Choice

Which of the following statements is not correct about materiality?

• A) The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GAAP, while other matters are not important.
• B) An auditor considers materiality for planning purposes in terms of the largest aggregate level of misstatements that could be material to any one of the financial statements.
• C) Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments.
• D) An auditor's consideration of materiality is influenced by the auditor's perception of the needs of a reasonable person who will rely on the financial statements.

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Definitions:

Current Ratio

A financial metric that assesses a firm's capacity to meet immediate liabilities using its current assets.

Cash Conversion Cycle

A metric that shows the time span between a company's outlay of cash and its collection of receivables; a measure of liquidity.

Trade Credit

Credit extended by a seller to a buyer allowing the latter to purchase goods or services immediately and pay for them at a later date.

Discounts Offered

Discounts Offered are reductions from the regular price of goods or services, often used as an incentive for customers to purchase more or pay earlier.