Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Material vs material and pervasive
- This topic has 3 replies, 3 voices, and was last updated 7 years ago by Ken Garrett.
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- February 25, 2017 at 1:27 pm #374156
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 thanksFebruary 25, 2017 at 6:47 pm #374200Pervasive 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.
March 3, 2017 at 5:56 am #375217Can i say pervasive more of material impact compare to material misstatement ?
March 3, 2017 at 7:47 am #375237You can, insofar as material means that a user of the FS could be making wrong financial decisions based on the effect of the item.
It also means that pervasive misstatements are not easily separted or isolated but affect all areas.
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