Accounting 732 Audit II 9/25/2012 Anne Aylor Inc. A. Why are different materiality bases considered when determining planning materiality? Different materiality bases are considered when determining planning materiality because the magnitude and nature of financial statement misstatements or omissions have different influences on different financial statement users. For example, investors are more interested in the accuracy of numbers involving net income because they are mainly concerned
different materiality bases considered when determining planning materiality? Financial information is prepared for multiple users for different purposes and thus not all elements of the financial statements are equally relevant to all users. For example, stockholders will be more concerned with long-term revenue and profit growth than creditors and thus revenues and earnings will be more important to stockholder decisions than creditor decisions b) Why are different materiality thresholds
Planning Materiality c a S eS inc lu de d in t hiS Se ction 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Anne Aylor, Inc. 229 Determination of Planning Materiality and Tolerable Misstatement ot he r c aSe S t h at diScuSS topicS related to thiS Section 5.6 Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences . . . . . . . . . . . . . . . . . . . . . . . Sarbox
affect the result when set the range of percentage applied to base. For example, when the $2000 total error is materiality is due to the set up limit is at $25000, and this $25000 set up based on the value of items tested. If the sample value is actually inaccurate lower than expected, then this will affect the limitation setting and make it lower. At this point, the error might be materiality when the limit down to $2000. As we don’t know the nature of the inventory, therefore it’s hard to say whether
Anne Aylor, Inc. Determination of Planning Materiality and Tolerable Misstatement MARKS. BEASLEY· FRANK A. BucKLEss ·STEVEN M. GLOVER· DouGLAS F. PRAWITT LEARNING OBJECTIVES After completing and discussing this case you should be able to [1] [2] Determine planning materiality for an audit client Provide support for your materiality decisions [3] Allocate planning materiality to financial statement elements INTRODUCTION j-- Anne Aylor, Inc. (Anne Aylor) is a leading national
CHAPTER 3 RISK ASSESSMENT AND MATERIALITY Answers to Review Questions 3-1 Audit risk is the risk that the auditor may unknowingly fail to appropriately modify the opinion on a set of financial statements that are materially misstated. Engagement risk is the exposure to loss or injury to professional practice from litigation, adverse publicity, or other events arising in connection with financial statements audited and reported on. In simple terms, audit risk is the risk that an auditor will
9-2) The following questions deal with materiality. Choose the best response. a. Which one of the following statements is correct concerning the concept of materiality? (1) Materiality is determined by reference to guidelines established by the AICPA. (2) Materiality depends only on the dollar amount of an item relative to other items in the financial statements. (3) Materiality depends on the nature of an item rather than the dollar amount. (4) Materiality is a matter of professional judgment
aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated. d. Understand the events and transactions that may have an effect on the client 's financial statements. 2. Prior to beginning the field work on a new audit engagement in which a CPA does not possess expertise in the industry in which the client operates, the CPA should a. Reduce audit risk by lowering the preliminary levels of materiality. b. Design
| | |Type of test and objective |12 | | |Risk model |7 | | |Materiality |8 | | |Relation of concepts |7 | | |Internal control - sales and cash receipts
have accepted the audit engagement, they move on to make sure that they are independent and that they follow the ethics requirements, once that is done they start audit planning, which involves development of an audit plan, planning risk assessment procedures, and looking for ways to respond to the risks of material misstatements. Another thing that needs to be evaluated is the extend of the risk assessment procedures that will be needed in order to complete the audit. (AS No.9 par.5, par.6 (b) and