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can someone clarify the difference between material & material and pervasive effect in reporting ?
Reply asap.
From what I understand
a material misstatement means a misstatement which relates only to current (or a single) reporting period and it will not have a material effect on other reporting periods like not a fraud and treating it as an expensewhile material and pervasive has impact in other periods as well (like capitalizing a huge amount of repair costs)
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Material imapct means that the misstatement will only hurt any one accounts in the financial statement and major portion of the financial statement can be relied upon.
Where as Pervasive impact means that no portion of financial statement can be relied upon due to material misstatement or lack of appropiate and sufficient audit evidence.
The decision whether the misstatement is material or pervasive totally depends on auditors judgement.- Topics: 0
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A matter is material if it has significant effect but however does not pervade the entire F/statements therefore makes thier understanding possible. e.g. only affects profit in statement of cmprehensive income or assets in statement of financial position, its is qualified with ‘except for’ opinion.
On the other hand, a matter is material and Pervasive if its effect on the F/statements is so significant that it pervades the entire F/statements and makes their undertstanding impossible.e.g affects both profit and assets, its qualified by ‘adverse opinion..does not fairly present..or does not give a true and fair view in case of misstatement or disclaimer in terms of unable to obtain sufficient appropriate audit evidence.
Further its true that its subjective as it depends on judgement of auditor as to others a matter may appear differently.
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