A2-Materiality Flashcards

1
Q

what is materiality level in a FS audit considered?

A
  • Because the FS are interrelated, materiality levels are generally considered in terms of the SMALLEST level of misstatement that could be material to any one of the FS?
  • Also considered both quantitative and qualitative judegements
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2
Q

what is best described the concept of materiality?

A

According the the US Supreme Court, information is material if there is a substantial likelihood that the information would be viewed by a reasonable investor as having significantly altered the total mix of available information

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3
Q

what is most likely used as preliminary judgement about materiality by the auditor?

A

prior year financial statements would be a good starting point in estimating the CY’s expected results

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4
Q

what are things to watch/consider when calculating materiality benchmark?

A
  • If there is a HIGH likelihood of materiality, use % closer to the LOWER end of the range provided in firm guidance
  • if there is a LOW likelihood of materiality, use % closer to the HIGHER end of the range provided in firm guidance
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5
Q

how to reduce the risk materiality of nonissuer regarding component and group FS?

A

auditor should establish a component materiality that is LOWER than the materiality for the group FS

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6
Q

When there is a group audit, what should the group engagement team make a preliminary assessment of materiality?

A

should assess the materiality of the group FS as a whole as well as performance materiality

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