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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).
•
A big amount of money (material by size).
•
– triggers a threshold
– indicates future developments or other significant events
– whose disclosure is compulsory
Why is materiality important?
•
show a true and fair view.
If financial statements contain a material misstatement they cannot
•
of material misstatement to an acceptable level.
Auditors therefore must design their audit procedures to reduce the risk
•
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
•
Need to examine all items in the financial statements which are material
•
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:

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