materiality

‘Information is material if its omission or misstatement could

influence the economic decisions of users taken on the basis of the

financial statements’

ISA 320 para 3

So what really is materiality?

(material by nature).

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A big amount of money (material by size).

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– triggers a threshold

– indicates future developments or other significant events

– whose disclosure is compulsory

Why is materiality important?

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show a true and fair view.

If financial statements contain a material misstatement they cannot

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of material misstatement to an acceptable level.

Auditors therefore must design their audit procedures to reduce the risk

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before they design their procedures – hence its place in this chapter.

This means that auditors must decide on what they mean by ‘material’

What are the implications for the work the auditors do?

Auditors will:

BUT

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Need to examine all items in the financial statements which are material

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amounts have not been they will also need to design tests to give assurance that materialomitted from the financial statementsAn amount which although not big: