Final answer:
Materiality in accounting and auditing incorporates both quantitative and qualitative factors and is not solely based on numerical analysis. Statement is false.
Step-by-step explanation:
The statement that materiality is based only on a quantitative analysis of the financial statements is false. Materiality is a concept used in accounting and auditing that refers to the significance of financial information to users. It involves both quantitative and qualitative factors.
A transaction or discrepancy is considered material if its omission or misstatement could influence the economic decisions of users made on the basis of the financial statements. While quantitative thresholds (such as percentage of revenue or net income) can guide the evaluation of materiality, qualitative factors (such as legal compliance, fraud, or the impact on a company's reputation) are also critical in assessing the materiality of financial information.