In auditing, what does materiality refer to?
Correct answer: B. The importance of a misstatement to users’ decisions
- A. The physical size of an accounting document
- B. The importance of a misstatement to users’ decisions
- C. The total value of all assets in an entity
- D. The number of transactions recorded during a year
Explanation
A matter is material when its omission or misstatement could influence the decisions of financial statement users. Materiality depends on the size and nature of the matter in the circumstances.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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