Materiality concept still evolving

Recall that AS5 changed the concept of the "likelihood" of material misstatement, adopting the phrase "more than remote" likelihood from "reasonable possibility." That was part of a larger effort to make Sarbanes-Oxley more principles-oriented. In that vein, the larger accounting concept of material weakness is also morphing. An SEC advisory group is looking into the issue. According to CFO.com, the group will stop short of changing the existing guidance, but will issue complementary guidance that will push auditors and issuers to embrace qualitative factors, not just quantitative factors, from the perspective of a "reasonable investor." The hope is to inject judgment into the picture, not more rules. This is a tricky area. My sense is that this will not radically alter the status quo. True, restatements are rising. But most of this is at the smaller company level, where the Sarbanes-Oxley process has yet to take full effect. Restatements by larger filers have fallen off impressively.  

For more:
- here's the CFO.com article

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