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Auditing: How is the concept of 'materiality' determined?

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Please help with the following problem about auditing. Provide at least 200 words in the solution.

How does the auditor determine materiality? Will materiality be the same for all auditors? Why or why not?

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Solution Summary

The posting help with a problem about external auditing. It explains the general concept of materiality from the perspective of current literature. The solution defines how materiality limits are practically computed and applied and gives more information about the relative guidelines used. The explanation is provided in 250 words.

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Problem: How does the auditor determine materiality? Will materiality be the same for all auditors? Why or why not?

Solution:

Materiality is an essential concept in both accounting and auditing. It is the criterion used to distinguish between trivial and important matters. Obviously, at some level, a misstatement in the financials statements is not important to the use and understanding of those statements, and the cost of eliminating that ...

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