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The Impact of Materiality: Accounting's Best Kept Secret

  • Niamh Brennan

    ()

    (School of Business, University College Dublin)

  • Sidney J. Gray

    (School of Business, University of Sydney)

This paper comprises a review of the literature on materiality in accounting. The paper starts by examining the context in which materiality is relevant, and the problems arising from applying the concept in practice. Definitions of materiality from legal, accounting and stock exchange sources are compared. The relevance of materiality to various accounting situations is discussed. Methods of calculating quantitative thresholds are described and illustrated. Prior research is reviewed, focusing on materiality thresholds, and on the materiality judgments of auditors, preparers and financial statement users. The paper concludes with some suggestions for future research and for policy makers concerning this best kept accounting secret.

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File URL: http://web.usm.my/journal/aamjaf/vol1/1-1.pdf
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Article provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.

Volume (Year): 1 (2005)
Issue (Month): 1 ()
Pages: 1-30

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Handle: RePEc:usm:journl:aamjaf00101_1-30
Contact details of provider: Web page: http://web.usm.my/aamj/

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  1. William Kinney, 2002. "Earnings Surprise "Materiality" as Measured by Stock Returns," Journal of Accounting Research, Wiley Blackwell, vol. 40(5), pages 1297-1329, December.
  2. Langevoort, Donald, 2002. "Taming the Animal Spirits of the Stock Market: A Behavioral Approach to Securities Regulation," Berkeley Olin Program in Law & Economics, Working Paper Series qt6th0728d, Berkeley Olin Program in Law & Economics.
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