Audit Midterm Materiality

Materiality

Matter of professional judgement

Auditor decides

Does not have a number tied to it (qualitative and quantitative reasoning)

Materiality judgements are used as a basis for

Determining the nature and extent of risk assessment procedures

Identifying and assessing risk of material misstatements

Determining test of controls and substantive audit procedures (testing balances and transactions in account)

Material if there is a substantial likelihood taht the different amount would make an investor change their mind about the financial statements

Planning Materiality

Materiality for the financial statements as a whole

Needs to be expressed in a specific amount

What to do when you know there is a material error

Give a qualified opinion

Make the client adjust financial statements (most of the time, the client will adjust)