Which of the Following Statements Is Not Correct About Materiality

question 51

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 the aggregate level of misstatements that could be material to any one of the financial statements individually.
• 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:

Budget System

A systematic process used by businesses and organizations for planning, controlling, and allocating financial resources.

Expected Activities

The projected activities or operations a business plans to undertake, usually within a specific timeframe, often related to budgeting and planning.

Operating Budgets

Operating budgets are detailed projections that outline the expected income and expenditures related to the day-to-day operations of a business for a specific period.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, helping organizations to manage cash flow and assess liquidity needs.