Which of the following statements is correct concerning materiality in a financial statement audit?
A. Materiality levels are generally considered in terms of the smallest aggregate level of misstatement that could be considered material to the financial statements.
B. The auditor’s materiality judgments generally involve quantitative, but not qualitative, considerations.
C. If the materiality amount used in evaluating audit findings increases from the amount used in planning, the auditor should apply additional substantive tests.
D. Analytical procedures performed during an audit’s review stage usually decrease materiality levels.
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Last Updated on February 2, 2022 by Admin 3
- Analytical procedures performed during an audit’s review stage usually decrease materiality levels.
- If the materiality amount used in evaluating audit findings increases from the amount used in planning, the auditor should apply additional substantive tests.
- The auditor’s materiality judgments generally involve quantitative, but not qualitative, considerations.
- Materiality levels are generally considered in terms of the smallest aggregate level of misstatement that could be considered material to any one of the financial statements.
Explanation:
Choice “D” is correct. Because the financial statements are
interrelated, materiality levels are generally considered in terms of the smallest level of misstatement that could be material to any one of the financial statements.
Choice “A” is incorrect. Analytical procedures are performed during an audit’s review stage to evaluate the overall financial statement presentation and to assess the conclusions reached. They generally would not result in a change in materiality levels.
Choice “B” is incorrect. If the materiality amount used in
evaluating audit findings increases from the amount used in planning, the auditor should consider whether the audit plan needs to be modified. Typically, an increase in materiality levels would result in a decrease in audit risk, which would result in less substantive testing, not more.
Choice “C” is incorrect. Qualitative considerations may lead to situations in which misstatements that do not exceed materiality limits are still likely to influence the economic decisions of users. In such
cases, an otherwise immaterial misstatement is deemed to be material.
- AUD CPA : All Parts