Do you believe that the $785,000 amount at the center of the Overstock-Grant Thornton dispute was material? Defend your answer.

Question

2 years ago

6

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?

Business

1 answer:

Pepsi [2] · Answer 1 · 2022-09-30T13:15:17+03:00

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 .