Which One of the Following Statements Best Describes the Concept

question 7

Multiple Choice

Which one of the following statements best describes the concept of materiality?

• A)Materiality is determined by reference to specific quantitative guidelines established by the AICPA.
• B)Materiality depends only on the dollar amount of an item relative to other items in the financial statements.
• C)Materiality depends on the nature of an item but not on the dollar amount of the item.
• D)Materiality is largely a matter of professional judgment.

---

Definitions:

Novation

The act of replacing an old obligation with a new one, substituting a new party for an original party in an agreement, with the consent of all parties involved.

Restitution

The act of restoring or compensating someone for loss, damage, or injury that has been incurred.

Repudiated Contract

This term refers to a contract that has been rejected or declared void by one of the parties involved, indicating they do not intend to fulfill their contractual obligations.

Liquidated Damages

A contractual provision that determines in advance the amount of damages to be paid if a party breaches the agreement.