Discussant's response to some thought on materiality;

              Discussant's Response to Some Thoughts on Materiality
Joseph J. Schultz, Jr.
University of Illinois at Urbana-Champaign
In addition to it being a real pleasure to be here at Kansas and to have the opportunity to exchange ideas with you, I am particularly honored to have the distinction of discussing the paper by Ken Stringer. I know of no other individual who is more responsible for moving the technical aspect of audit practice along more than Ken. I suspect that Ken would be the first to admit that progress is not always achieved without a few detours along the way. I think we would all acknowledge that without taking a few side trips down these unchartered roads, life would become static and dull. My remarks today center on the proposition that once again Ken is moving us in the right direction, but not necessarily along the four-lane. My remarks today will be divided into issues related to the paper and ideas on materiality generally.
The Paper
The concept of materiality is a threshold concept that relates to the users of information who make a myriad of decisions. In our society, a major group of these decisions are made by investors who buy, sell or hold securities based on this information. We, as accountants and auditors, are interested particularly in the role that financial statements play in that set of information. Society gives us general direction in carrying out our role as auditors. An indication of some of this direction is evidenced in the following excerpts.
The term "material," when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters about which an average prudent investor ought reasonably to be informed. Regulation S-X, Rule 1-02. (Emphasis added.)
... A fact which if it has been correctly stated or disclosed would have deterred or tended to deter the average prudent investor from purchasing the securities in question. Escott, et al. v. BarChris Construction Corporation. 283 F. Supp. (S.D.N.Y.) 849 (1968). (Emphasis added.)
The basic test of materiality ... is whether a reasonable man would attach importance ... in determining his choice of action in the transaction in question . . . (and the above test would encompass any fact) which in reasonable and objective contemplation might affect the value of the corporation's stock or securities. SEC v. Texas Gulf Sulphur Co. 401 F2d 849 (1968). (Emphasis added.)
There must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having
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