Evaluating the magnitude of material misstatement, use an example

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Business Finance

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Evaluating the magnitude of material misstatement, use an example where there is either little or great reprucussions in your view. Can their be small effects or are all effects substantial in nature?  Please explain. 

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Explanation & Answer

An example of a material misstatement is where accountants incorrectly records amounts in the financial statements. It could have happened due to recording of wrong amounts or amounts in the wrong accounts. The effects of inappropriate recording of amounts in the financial statements is substantial in nature. it results to improper accounting that is not in accordance with the GAAP. It could also result to inappropriate investment decisions on the part of the investors.

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