Measured on the Transactional or the Financial Statement level Audit plan based on smallest misstatement that could be material to Financial Statements If materiality thresholds differ among Financial Statements, then use the lowest threshold amount. DON’T average them.

Based on Auditor Judgment Auditor must consider needs of users Audit should be planned to allow “reasonable assurance” that no material misstatements exist

As acceptable Materiality level Decreases Auditor must find smaller misstatements More individual account testing & testing closer to Balance Sheet Date

Materiality Flashcards by Suzanne Green

Materiality

Quantitative and Qualitative Measurements

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MATERIALITY

Measured on the Transactional or the Financial Statement level
Audit plan based on smallest misstatement that could be material to Financial Statements
If materiality thresholds differ among Financial Statements, then use the lowest threshold amount. DON’T average them.

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MATERIALITY

Based on Auditor Judgment
Auditor must consider needs of users
Audit should be planned to allow “reasonable
assurance” that no material misstatements exist

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MATERIALITY

As acceptable Materiality level Decreases
Auditor must find smaller misstatements
More individual account testing & testing closer to Balance Sheet Date

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Litigation and Claims

If Auditor suspects legal proceedings could contribute to a Material Misstatement, then they must contact the entity’s external Legal Counsel

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Materiality Flashcards

(5 cards)