Difference between revisions of "Pop Quiz Materiality"
Jump to navigation
Jump to search
| Line 3: | Line 3: | ||
* Therefore its <u>net income</u> is likely much lower so smaller swings in net income would have a proportionately greater impact on decision-making ''(versus Company A.)'' | * Therefore its <u>net income</u> is likely much lower so smaller swings in net income would have a proportionately greater impact on decision-making ''(versus Company A.)'' | ||
| − | Other considerations in setting a materiality level might include: | + | Other considerations in setting a materiality level might include: [Hint: <span style="color: red;">'''F-STARS'''</span>] |
: <span style="color: red;">'''F'''</span> '''FINANCIAL''' strength | : <span style="color: red;">'''F'''</span> '''FINANCIAL''' strength | ||
Latest revision as of 18:49, 12 March 2019
Answer: Company B would have a lower materiality level.
- It's at a much earlier stage in its organizational life cycle.
- Therefore its net income is likely much lower so smaller swings in net income would have a proportionately greater impact on decision-making (versus Company A.)
Other considerations in setting a materiality level might include: [Hint: F-STARS]
- F FINANCIAL strength
- –
- S SIZE (of entity)
- T TYPE of business
- A ACCESS (to capital)
- R net RETENTION
- S STAGE (of organization's life cycle)
