Which of the following is an example of a qualitative materiality factor? Group of answer choices

a. The client installed a new security system to protect the building.

b. The client is experiencing a slowdown in sales and is struggling to pay vendors on time.

c. Inventory represents 40% of current assets.

d. Total salaries expense is greater than 5% of income before taxes.

Question

Business

Lexi

17 October, 18:40

Which of the following is an example of a qualitative materiality factor? Group of answer choices

a. The client installed a new security system to protect the building.

b. The client is experiencing a slowdown in sales and is struggling to pay vendors on time.

c. Inventory represents 40% of current assets.

d. Total salaries expense is greater than 5% of income before taxes.

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Answers (1)

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Cassie Cooke · Answer 1

"Inventory represents 40% of current assets" is an example of a qualitative materiality factor.

Answer: Option C

Explanation:

A principle that connect with the significance of transaction, an amount or discrepancy within accounting and auditing is understood as a "Materiality". For the preparation and presentation of financial statements in the accounting context while for the assessment of misstatements material contained in the financial statements in the audit context. This identification is done, based on quantitative factors and qualitative factors. Whereas the Board can not determine a standardized quantitative materiality threshold or predetermine what might be content in a specific situation.