Purchase Solution

Audit Assessment of Materiality

Not what you're looking for?

Ask Custom Question

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.

Attachments
Purchase this Solution
Solution Summary

This problem involves the fundamentals of Auditing.

Solution Preview

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 ...

Purchase this Solution
Free BrainMass Quizzes
Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Operations Management

This quiz tests a student's knowledge about Operations Management

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

View More Free Quizzes
Related BrainMass Solutions

  • Auditing: Importance of second materiality assessment

    424124 Auditing: Importance of second materiality assessment Why is it important that an auditor make a second assessment of materiality at the conclusion of the audit? Who in the audit firm is generally responsible for making these assessments?

  • Materiality and Audit Risk

    An efficient auditor's assessment of materiality and audit risk may change from initial planning the engagement to evaluating the results of audit procedures.

  • Audit: Qualitative benchmarks an auditor can use to assess materiality

    The assessment of planning materiality is needed for risk assessment purposes.

  • Levels of Materiality within Auditing

    This materiality assessment is referred to as: a.planning materiality, b.preliminary materiality, c.initial materiality, d.beginning materiality, or e.benchmark materiality. 4.When setting the level of materiality on a particular engagement,

  • External Audit: relationship between risk and materiality

    High risk can lead to high costs in defense of claims, loss of a client, damage to reputation, increased malpractice insurance, and more. The assessment of risk is one of the first steps in the audit process (particularly for a new client).

  • This post addresses audit program outlines and audit issues.

    The Audit Risk Assessment involves considering multiple factors one of which is management integrity. If the leadership of a company is engaged in an illegal activity, this raises a red flag on the Audit Risk assessment. Your thoughts?

  • Audit materiality

    It is required for risk assessment and control (Puttick & Esch, 2007).

  • Study Guide Questions on Auditing

    The financial statement level is always an assessment for materiality, it is basically what the entire audit was based upon. 2) Materiality at the account balance level is stated in planning an audit because: b. the auditor verifies account balances

  • Evidence, risk assessment, specific risks & audit risks

    Relationship among Materiality, Detection Risk and Substantive Audit Evidence: Materiality is an expression of the relative significance or importance of a particular matter in the context of financial statement as a whole.

View More Related Solutions