Question

Explain why materiality is important but difficult to apply in practice.

Answer 1

Materiality is important because if financial statements are materially misstated, users' decisions may be affected, and thereby cause financial loss to them. It is difficult to apply because there are often many different users of the financial statements is the correct statement for the difficulty of applying the materiality in practice.

Answer: Option C

Explanation:

Materiality is important but difficult to apply in practice because the user’s decisions may be hugely affected if the financial statements are misstated materially and this may cause a loss.

It is also very difficult in applying in practice due to having many different users of the financial statements. Making an assessment of the users is compulsory by the auditors and use the application of the materiality.