ICAEW ARF · Chapter 3 · Question 6 of 13
Which of the following misstatements is most likely to be material by its nature, even though the amount is small?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) An understatement of directors' remuneration disclosed in the notes to the financial statements
Explanation
Materiality has qualitative as well as quantitative aspects. Directors' remuneration is of particular interest to shareholders and is a legal disclosure, so even small errors may influence users and reflect on directors' stewardship. Small, routine errors in depreciation, cut-off or expense classification are unlikely to be material unless their size is significant.
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