Politeknik Audit Case Study 4

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 with the company’s ability to increase shareholder wealth. For an audit company, the primary concern when planning materiality is to take into account all expected financial statement users. These different expected users all have different

In today’s world, the role of IT has turned accounting estimated critical in financial reporting and disclosure. Houghton and Fogarty have said that non-accurate or incorrect estimates have often caused to misstatements in audit report (Gray & Manson, 2007).

Incorrect information can have serious negative effects and can affect a company’s financial status and values. Accuracy of information will help executives plan ahead for the future and lay goals. They will also be able to plan for the

3. AASB 1031 materiality. Planning materiality and performance materiality – are only for auditors. Planning materiality – one base for the whole statement. For public companies – net profit since people are more focussed on that only if it is stable, if not pick total revenue or total assets. Used for financial statements as a whole.

If, in the auditor's judgment, management has not adequately addressed the effects of estimation uncertainty on the accounting estimates that give rise to significant risks, the auditor shall, if considered necessary, develop a range with which to evaluate the reasonableness of the accounting estimate.

The auditor should consider planning materiality. When a financial statement account exceeds the planning materiality, that account should be considered significant for both the audit of internal control over financial reporting and the financial statement audit. The more the account exceeds planning materiality, the greater it should be considered significant.

Quality Objectives - The quality objectives define measurable goals relative to the company's quality management system. Requirements on the quality objectives are in ISO 9001:2008 section 5.4.1.

There are certain errors that are not as imperative to investors as other errors are. An error that can be classified as significant for example those errors that result in overstatement should always be pointed out to investors. There are certain errors that can reveal weaknesses in a company’s internal controls therefore, resulting in more significant errors. Errors should be corrected as soon as they are discovered. To correct errors the restatement approach should be employed and all prior period statements that are presented should be corrected and the beginning balance of retained earnings for the first period presented should be restated when the error effects occur

The management is required to make judgments regarding uncertain issues on some of the critical accounting estimates and policies applied in the preparation of annual reports. Examples of the critical accounting estimates and policies include the revenue recognition principle, inventory valuation methods, measurement of legal and other contingencies, and valuation and impairment of short-term and long-term marketable

The information reflected in the financial statements actually is expected to be of high quality and useful to support the quality decision-making of market stakeholders due to the far-reaching and very costly consequences. It is important in this context to properly identify and discuss the user needs and thereby we refer to the actual requirements of all information users amongst them the management, which uses the financial information to steer, regulate and co-ordinate the business.

B) I think the auditors should have equal responsibility for detecting material misstatements due to error and fraud. It’s their job to make sure the financial statements are as accurate as possible. Although it may be hard to check all the information from a company it’s the responsibility of the auditor to sign off that everything is in check.

Each user of the financial statements interprets the information in a different manor. They use the information to determine their interactions with the organization. Management, investors, and employees use the same information from the financial statements but for different purposes. These four basic statements are the fundamentals of accounting which can be much more detail and complex. They do not need to be more complex for the users of the information; these basic statements have all the information needed to make

This essay will begin to look at the main financial statements used by decision makers in businesses today. This essay will go into detail about the income statement and statement of financial position and whether these two statements provide decision makers with their financial information adequately. This essay will also include the various advantages and disadvantages of each financial statement as well as describing whom the decision makers are and why financial statements are important to them. A conclusion will be present at the end of this essay to demonstrate an overall view of whether financial statements are beneficial to decision makers.

The FASB provides guidance for measuring materiality in an audit. Materiality incorporates professional judgment in practice; however, factual information and the consideration of the needs of the users of financial statements provide a guideline for measurement. The prevailing methods of measurement incorporate quantitative and qualitative characteristics of

A company prepares financial statement to provide information about its financial position and performance. This information is in turn used by a wide range of stakeholders (such as investors, banks, customers, suppliers etc) in making economic decisions with respect to respective economic interest in the company. Typically, in terms of ownership by investment in shares of the company, shareholders though own the company but do not manage it. Therefore, the shareholder and other such stakeholders to get comfort in taking sound decision need independent assurance from the auditors that the financial statements reflect true and fair view of the company affairs in all material respects. Hence, in order to enhance the level of