Materiality Flashcards

1
Q

What does Materiality in Planning and Performing An Audit state?

A

That the auditor’s objective is to apply the concept of materiality appropriately in planning and performing the audit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is Materiality?

A

Materiality can be described as “an understanding of what is important” in financial reporting based on the auditor’s perception of the users’ needs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does Materiality mean according to FASB?

A

The magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

The determination of materiality is a matter of professional judgment, and involves both?

A

Quantitative (the relative magnitude of the items in question, measured by quantity) and Qualitative (the surrounding circumstances, measured by quality) considerations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

The auditor considers the concept of materiality throughout the audit process as well as in…

A

…planning and performing the audit; (b) in evaluating the effect of uncorrected misstatements on the entity’s financial statements; and (c) in forming the auditor’s opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is Performance Materiality?

A

The amount(s) set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What should the auditor Document when it comes to Materiality?

A

1 Materiality for the financial statements as a whole
2 Materiality level(s) for particular classes of transactions, account balances, or disclosures, as applicable
3 Performance materiality
4 Any revision of those considerations during the audit engagement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a Tolerable Misstatement?

A

This term refers to the maximum error in a population that the auditor is willing to accept

How well did you know this?
1
Not at all
2
3
4
5
Perfectly