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Auditors consider materiality in assessing the application of accounting principles , in planning the audit and designing audit procedures , and in evaluating the significance of misstatements ( also referred to as audit differences ) identified during the audit if management decides not to record some or all of them . Because of inherent limitations in internal control , misstatements due to error or fraud may nevertheless occur and not be detected . " The appellant went on to say that the answer key provides one point for identifying " material misstatement , " however , added the appellant , Mr. Horwood received the full four points even though he never identified " material " misstatement . However , the Court of Appeals went on to apply the following three factors in concluding that the misstatement of law was not prejudicial to the defendant : " ( 1 ) the jury instructions , ( 2 ) the balance of the prosecutor 's remarks during closing argument , and ( 3 ) the evidence . Currently , under code section 6662 ( e ) ( 1 ) ( B ) ( i ) a substantial valuation misstatement penalty applies if the deduction claimed is 100 % greater than the amount determined to be correct . 3d 56.04 ( b ) , curing any prejudice caused by the misstatement . The remarks in this case were not intentional misstatements of the law , but rather , appear to be the result of an inept mistake that arose out of the effort to make the legitimate point that force does not require the infliction of violence . Increase penalties for substantial misstatements of the value of donations , and expand those penalties to include disbarment of appraisers involved in substantial misstatements from having their work accepted by the IRS in the future . I undertake to bring to the media 's attention any misstatement of fact about anyone , not just the Clinton 's , and have been doing that for some time . But I seem to recall a concept from the 200 election about a pattern of deception meaning that you could n't trust even the candidate 's innocent misstatements .