Indeed I agree with Jeffrey Nossek that regardless of the importance of materiality concept to accountants, it can sometimes lead to challenges especially when a misstatement occurs because this can have a negative impact on economic decisions that accountants make with regards to financial statements i.e. the IASB Framework (Schmidt, 2018). However, I allow me to emphasize the importance of materiality because it has over the years been associated with the significance of errors, balances, and transactions found in the financial statements. Moreover, materiality is very necessary as it describes the cutoff point or threshold upon which the financial data is rendered useful for accountants’ decision-making. In this regard, all the financial statement data are supposed to be complete on the basis of material if they have to posit a fair and true outlook concerning the entity affairs (Schmidt, 2018). Therefore, materiality is always relative to specific circumstances and size of an individual firm.
For example, a customer who owes a company only $800 alongside net assets of $80 million and decides to default on this debt will become immaterial to this company’s financial statement. Consequently, in case the amount of money defaulted was of $3 million then that kind of information might have significantly been material for the company’s financial misstatement thus causing the organization’s accountants to make incorrect decisions in the organization (Schmidt, 2018). Therefore, I agree with Jeffrey Nossek that material influences certain economic decisions are making it very useful to the needs of such decisions. So misstatement of financial statements would considerably make an accountant create an incomplete financial statement thus adversely impeding reliability of such data (Schmidt, 2018). In conclusion, it is critical to ensure as an accountant that the financial statements are made complete in the entire material respect to provide a fair and true view of the organization’s affairs.
Schmidt M. (2018). Build a Compelling Business Case. Retrieved at https://www.business-case-analysis.com/