The Materiality Constraint

question 85

Multiple Choice

The materiality constraint:

• A) is only relevant when preparing annual financial statements as opposed to quarterly statements.
• B) is applicable only for low-cost items that cost less than, say, $500.
• C) is the only defence for gross negligence by an independent accountant.
• D) does not necessarily imply that an immaterial amount can be ignored for accounting purposes.

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Definitions:

Fetal Alcohol Syndrome

A condition resulting from alcohol consumption by the mother during pregnancy, causing physical and mental developmental issues in the child.

Miscarriage

The spontaneous loss of a pregnancy before the fetus can survive outside the womb, typically before 20 weeks of gestation.

Mortality Rate

The measure of the number of deaths in a particular population, scaled to the size of that population, per unit of time.

J-Shaped Relationship

A statistical pattern where lower and higher amounts of a variable are associated with higher risks, and moderate amounts have the least risk, resembling a "J" on a graph.