Week 2 - Materiality

Question 1

Misstatements, including omissions, are considered to be material if they…

Answer 1

Individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of financial statements

Question 2

We would set the materiality level to use at…

Answer 2

The planning stage of the audit for each client

Question 3

What should the assessment of materiality be based on at this stage?

Answer 3

The most recent and reliable financial information

Question 4

What will materiality at this stage help us to determine?

Answer 4

An effective and efficient audit approach

Question 5

Materiality assessment will help the auditors to decide:

Answer 5

• how many and what items to examine
• whether to use sampling techniques
• what level of misstatement is likely to lead to an auditor to say the financial statements do not give a fair and true view

Question 6

What does materiality refer to (ChatGPT definition)?

Answer 6

The threshold above which an error, omission, or misstatement in the financial statements would likely influence the decisions of users, such as investors, creditors, or regulators