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2 July, 09:11

Do you believe that the $785,000 amount at the center of the Overstock-Grant Thornton dispute was material? Defend your answer. What factors other than quantitative considerations should have been considered in deciding whether the $785,000 amount was material?

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  1. 2 July, 11:47
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    Answer: Yes

    Explanation:

    The $785,000 was material because it meets both the quantitative and qualitative factors for materiality. Quantitatively, it is more than 10% of the net income of the company ($7.7million) and qualitatively, it showed a relaxed attitude of management towards accounting misstatements.

    Some factors other than quantitative considerations that can be used to determine the materiality of the amount in question are:

    Effect on changing loss to profit or profit into loss. Effect of management's compensation. Effect on the public/shareholders/share prices. Possibility of fraud or conflict of interest. Attitude of management to accounting misstatements.
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