In Deciding Whether an Item Is Material, a Young Accountant

question 18

Multiple Choice

In deciding whether an item is material, a young accountant determines that an item is less than 5% of the appropriate base amount.This means that the item:

• A)is material
• B)is not material
• C)is in the no presumption range
• D)could be material depending on qualitative factors

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Definitions:

Systematic Risk

The inherent risk that affects the entire market or a whole segment of the market, often influenced by geopolitical and economic factors.

Portfolio Diversification

An investment strategy used to reduce risk by allocating investments among various financial instruments, industries, and other categories.

Number of Assets

The total count of individual assets, both tangible and intangible, owned or controlled by an entity.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed funds and exchange traded funds.