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Net profit for Greed & Mean Ltd. for the year ended December 31, 2019, after charging...

Net profit for Greed & Mean Ltd. for the year ended December 31, 2019, after charging remuneration to the CEO in the amount of $5.2 million, amounted to $990 million. You have noted that the CEO has charged personal travelling expenses amounting to $800,000 to business expense. Required: Will the CEO's personal travelling expenses have a material effect of the financial statements?

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Answer #1

No , because a company earning of $990 million net profit and a remuneration to CEO of $5.2 million has little effect on a expense of $800000

An expense of $800000 is just 0.08% of $990 million and its misappropriation will not effect the decision of a user of the financial statement as it is less than 1% of the net profit of the company

Since the expense amount is small compare to the net profit of the company it doesn't have a material effect on the financial statement

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