Question

The U.S. Supreme Court defines materiality as "the magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement." a. True b. False

Answer 1

Answer:

TRUE

Explanation:

The U.S. Supreme Court defines materiality as "the magnitude of an omission or misstatement of accounting information because a company or organization should not apply the requirements of an accounting standard if it is immaterial to the financial statements or makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.

Materiality concerns the important of an item to users of a financial statements because a financial statement is only "material" if there is a probability that a reasonable person would consider it important.