Question

Companies and their auditors have adopted a general rule of thumb that anything under 5% of _______ is considered not material.

Answer 1

The answer is net income

Step-by-step explanation:

Net income is the difference the total revenue generated and the total cost(cost of sales, salaries, electricity etc.)

Materiality: A financial statement is said to material is when its misstatement or omission affects the opinion of its intended users.

Companies and auditors have agreed that anything under 5% of net income is considered not material, meaning any misstatement less than 5% of the net income is not considered to be important to alter the view of the users. In this kind of situation, auditors' opinion on the financial statement will be true and fair.