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Good afternoon, i am having difficulty understanding the difference between Material and material and pervasive. Could you provide me with examples of material and pervasive as i can never apply it to a scenario
Many thanksPervasive means so serious that the FS are completelt undermined as the error or lack of,evidence cannot be isolated.
For examplw, if inventory was 25% of the assets and represented 50% of profits,then the FS are more or less useless.The problem is probaby pervasive.
If,we,were talking about 10% profits then it would be material but probably not pervasive.
I have used ‘probably’ in both examples because there is no absolute rule. Auditors are fairly reluctant to say a problem is pervasive because then the FS are a waste of paper. It is more,useful to shareholders if an ‘except ….for’ qualification is possible. Then the FS are ‘ok’ except for an isolated problem so are of,some use to shareholders.
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