Question

During the audit of LEGOND Group, auditors discover a $5,000 understatement of expenses that auditors agreed would not be significant enough to influence a user's decisions. This would most likely be which of the following?

1) Neither quantitatively nor qualitatively material
2) Qualitatively material
3) Both quantitatively and qualitatively material
4) Quantitatively material

Answer 1

The $5,000 understatement of expenses in LEGOND Group's audit is neither quantitatively nor qualitatively material since it is not large enough nor of such nature to affect a user's decision-making process.

Step-by-step explanation:

If during the audit of LEGOND Group, auditors discover a $5,000 understatement of expenses and they agree that it would not significantly influence a user's decisions, this is most likely neither quantitatively nor qualitatively material. The concept of materiality in auditing refers to the importance or significance of an amount, transaction, or discrepancy. In this context, quantitative materiality deals with the numerical magnitude of a misstatement, while qualitative materiality concerns the nature of the misstatement and the circumstances under which it occurs. Since the auditors have determined that the $5,000 understatement of expenses would not affect a user's decision-making process, it implies that the error does not meet the threshold for materiality either in size or nature.