The audit report provides reasonable assurance that thefinancial statements are free from material misstatements. The auditorassesses materiality in planning the audit to ensure that sufficientappropriate audit work is performed to detect material misstatements.However, the auditor is in a difficult situation because materiality isdefined from a user’s viewpoint.a. Define materiality as used in accounting and auditing, particularlyemphasizing the differences that exist between the FASB and theU.S. Supreme Court materiality definitions.b. Three major dimensions of materiality are: (1) the dollar magnitudeof the item, (2) the nature of the item under consideration, and(3) the perspective of a particular user. Give an example of each.c. Once the auditor develops an assessment of planning materiality,can it change during the course of the audit? Explain. If it doeschange, what is the implication of a change for audit work thatthe auditor has already completed?
The audit report provides reasonable assurance that the
financial statements are free from material misstatements. The auditor
assesses materiality in planning the audit to ensure that sufficient
appropriate audit work is performed to detect material misstatements.
However, the auditor is in a difficult situation because materiality is
defined from a user’s viewpoint.
a. Define materiality as used in accounting and auditing, particularly
emphasizing the differences that exist between the FASB and the
U.S. Supreme Court materiality definitions.
b. Three major dimensions of materiality are: (1) the dollar magnitude
of the item, (2) the nature of the item under consideration, and
(3) the perspective of a particular user. Give an example of each.
c. Once the auditor develops an assessment of planning materiality,
can it change during the course of the audit? Explain. If it does
change, what is the implication of a change for audit work that
the auditor has already completed?
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