#15 Immaterial
Feb 6th, 2009 by pfi
If accountants had their way, everything would be immaterial.
“50% of gross assets? Immaterial!”
“Oh, it’s only a few hundred million off? Totally immaterial.”
Material, roughly speaking, means that an omission or misstatement of the data could potentially influence the decision of an end user. To say something is immaterial is to say that it is not material and would likely not matter to end users (e.g. banks, investors, government, etc).
Accountants, in public or industry, are grateful for this concept of declaring things immaterial. To individuals such as you and I, $10,000 misplaced would be A VERY BIG DEAL. However to accountants, it is trivial to wave away problems with large dollar amounts as immaterial and move on with their lives.
Does a company that has billions in assets really care if $10,000 is missing? Probably not. This is one of the benefits of accounting where accountants, who would be devastated if $20 was missing from their own pockets, absolutely could not care less if $20M won’t reconcile at a large corporation.
It’s not necessary to go into detail how accountants calculate materiality in this post, but just be aware that an accountant’s quality of life is directly correlated to the threshold of which things are considered immaterial.
This blog is brilliant!!! Don’t forget to include some tax accountant specific items in addition to the audit specific items!! Maybe the IRS website should be on the links on the right side…?
Thanks! Keep up the good work!
This is a great blog. But, I agree… the tax accountants need a shout out too!
Speaking of tax and immateriality, we in tax HATE it when we see “immaterial” in the workpapers. It means more work for us!
$20,000 in unreconciled, unknown-basis, unknown-proceeds capital gains… “immaterial!” to the auditors. But very material for us!
Just plug it.
Love your blog. The quote about materiality and quality of life made me laugh and then think about how often I have passed on something thinking “ahh, immaterial”.
Agree with the previous comments – time for some stuff about tax accountants (I am one).
I deem people immaterial now.
And you tax accountants should stop delegating and come up with other items to post.
Can we have one called delegating? Up, down, sideways?
[…] Comments « #15 Immaterial […]
I couldn’t agree more with this post. When heading to a new client for the first time, there are always three questions asked (in order of importance):
1. Are there any good lunch places nearby?
2. What’s the client’s materiality?
3. How do I get to their office?
[…] at Starbucks every day of the year. However, when asked to pay for parking, you’d think their materiality threshold just split in half. Since accountants hate paying for parking, it stands to reason that they love […]
You are an idiot. Private Accountants care about accuracy to the penny. Auditors have a materiality threshold and it has nothing to do with amounts “missing”. I used to be an auditor and I benefited from a materiality threshold, but as a accountant for a company wrong is wrong and right is right, regardless of size. They way you described the concept of materiality would lead someone to believe that immaterial stolen amounts of cash would be ok with auditors, it wouldn’t be.
Hey, I think it is about time to have a post about “appears reasonable…”. That is a legendary phrase in audit world, that could mean the difference between more work and wrapping up an engagement.
immaterial… appears reasonable… also goes great with “NFWD”!
The three biggest lies in auditing are:
1) This year, we’ll have complete client cooperation.
2) Your budget is achievable.
3) It’s immaterial.