The president of a public corporation recently commented, “Our auditor states that our financial statements present a ‘true and fair view’ of our financial position and financial performance. I challenged him as to how he determined such fairness. He replied that fairness means that the financial statements are not misstated in amounts that would be considered material.
“I believe that there is some confusion with this materiality concept, since different users of our financial statements may have different ideas as to what is material. For example, bankers, institutional investors, small investors, and tax assessors all have different perceptions of materiality.”
Required:
Discuss the issues raised by the president.