In accounting, misstatement may come in varying degrees, including mainly material misstatement and immaterial misstatement. Material misstatement arises from the financial statements presented by a reporting entity that are not in conformity with applicable standards or framework, in all material respects. For audited financials, this reflects the auditor’s belief that the financial statements, perceived as a whole, are materially misstated.

Financial statements are materially misstated when these statements contain misstatements (errors, fraudulent misrepresentations) whose effect, individually or as a whole, is sizable or effective enough to hinder or disallow fair presentation under applicable reporting framework.