CFA Practice Question
Materiality is one of the pervasive concepts in financial accounting. Which of the following statements is true with regard to materiality?
A. Materiality judgments generally may be made without consideration of the magnitude of the item involved.
B. Materiality judgments generally may be based solely on the magnitude of the item.
C. The nature and magnitude of an item as well as the circumstances in which the judgment has to be made are integral aspects of a materiality judgment.
Explanation: The basis for a materiality judgment is generally not sufficient unless the nature of the item, the circumstances in which the judgment has to be made, and the magnitude of the item are all considered.
User Contributed Comments 4
| User | Comment |
|---|---|
| cjpatel | huh.......?? |
| birdperson | ^second that! |
| thebkr7 | third |
| Ngana | Materiality of a line item is about considering its Qualitative ( i.e intention to commit fraud, is it affecting users decisions about the entity ) and Quantitative ( is it bigger than a number applied to all line items in Financial statement statement to determine whether material or not) Factors |