Week 2 - Materiality Levels - Qualitative

Question 1

What are the first two items that are material by nature?

Answer 1

• director’s renumeration
• related party transactions

Question 2

What are the second 3 items that are material by nature?

Answer 2

Amounts that:
- turn a profit into a loss (vice versa)
- affect loan covenants
- influence investor expectations

Question 3

What are the final 4 items that are material by nature?

Answer 3

Amounts that:
- trigger a payout
- fraud
- illegality
- non-compliance with legislation

Question 4

Materiality in Planning and Performing an Audit paragraph A1 states that ‘materiality and audit risk are considered throughout the audit, in particular when…’ 1.

Answer 4

Identifying and assessing the risks of material misstatements

Question 5

Materiality in Planning and Performing an Audit paragraph A1 states that ‘materiality and audit risk are considered throughout the audit, in particular when…’ 2.

Answer 5

Determining the nature, timing and extent of further audit procedures

Question 6

Materiality in Planning and Performing an Audit paragraph A1 states that ‘materiality and audit risk are considered throughout the audit, in particular when…’ 3.

Answer 6

Evaluating the effect of uncorrected misstatements, if any, on the financial statements

Question 7

Materiality in Planning and Performing an Audit paragraph A1 states that ‘materiality and audit risk are considered throughout the audit, in particular when…’ 4.

Answer 7

Forming the opinion in the auditor’s report