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Audit Assessment of Materiality

4-58 (Audit Assessment of Materiality) The audit report provides reasonable assurance that the financial statements are free from material misstatements. The auditor is put in a difficult situation because materiality is defined from a user viewpoint, but the auditor must assess materiality in planning the audit to ensure that sufficient audit work is performed to detect material misstatements.

Required

a. Define materiality as used in accounting and auditing.
b. Briefly discuss the difference between a "quantitative" assessment of materiality and a "qualitative" assessment of materiality.Give an example of each. Is one dimension more important than the other? Explain.
c. Once the auditor develops an assessment of materiality, can it change during the course of the audit? Explain. If it does change,what is the implication of a change for audit work that has already been completed? Explain.

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4-58 (Audit Assessment of Materiality) The audit report provides reasonable assurance
that the financial statements are free from material misstatements. The auditor is put in a difficult situation because materiality is defined from a user viewpoint, but the auditor must assess materiality in planning the audit to ensure that sufficient audit work is performed to detect material misstatements.

Required

a. Define materiality as used in accounting and auditing.
b. Briefly discuss the difference between a "quantitative" assessment of materiality and a "qualitative" assessment of materiality.Give an example of each. Is one dimension more important than the other? Explain.
c. Once the auditor develops an assessment of materiality, can it change during the course of the audit? Explain. If it does change,what is the implication of a change for audit work that has already been completed? Explain.

a. Materiality is one of the basic and major concepts of auditing. Auditing and Assurance Standard (AAS) (hitherto known as Standard Auditing Practices (SAPs))-13, "Audit Materiality", states that the concept of materiality recognises that some matters, either individually or in the aggregate, are relatively important for true and fair presentation of the financial information in conformity with recognised accounting policies and practices. There are no sets of rules or prescriptions that may be applied consistently to determine materiality in all circumstances. Materiality is a relative terms.What may be material in one circumstance may not be material in another. The assessment of what is material is a matter of professional judgement and experience of the auditor.In this paper, concept of materiality concept of audit risk, auditor's consideration of materiality while making an opinion on the financial statements, etc. arediscussed in brief. The matters that are to be considered, among other things, by the auditor to decide on materiality are also outlined.
Source: http://biblioteca.universia.net/ficha.do?id=2970621

Another source:

The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework. The assessment of what is material is a matter of professional ...

Solution Summary

This problem involves the fundamentals of Auditing.

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