Considering Qualitative Factors What are the considerations that may cause a quantitatively small misstatement to be considered material?
Some of the considerations that may cause a quantitatively small misstatement to be considered material include whether the potential misstatement:
1 . Arises from an item capable of precise measurement or whether it arises from an estimate and if so, the degree of imprecision inherent in the estimate.
2 . Masks a change in earnings or other trends.
3 . Hides a failure to meet analysts' consensus expectations for the enterprise.
4 . Changes a loss into income or vice versa.
5 . Is in a segment that has been identified as having a significant effect on the company's stock valuation.
6 . Affects compliance with regulatory requirements.
7 . Affects loan covenants or other contractual requirements.
8 . Has the effect of increasing management's compensation—for example, by satisfying requirements for the award of bonuses or other forms of incentive compensation.
9 . Involves concealment of an unlawful transaction.
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