Auditig 521_WEEK_03.pptVIP

How is Materiality Determined? Materiality is a key auditor judgment involving both quantitative and qualitative considerations. Quantitative ‘rules of thumb’ are often used as a starting point, but Auditors cannot rely solely on quantitative benchmarks. Standards do not provide definite quantitative requirements to determine materiality. 嫂表涝镊良虞骗尸线儿嘉划慧取弘铰邀壕毋诞勋益伞谋缺韭溶彤絮澎招绍Auditing 521_WEEK_03Auditing 521_WEEK_03 Materiality Judgment Criteria - Quantitative Some quantitative guidelines suggested in CAS 320: 5% of income from continuing operations, 5% of net income before bonus, ? to 2% of revenues or expenses for non-for profit entities, etc. When income measures are used as a basis, they should be normalized or averaged. In some circumstances, the auditor may also select alternative financial statement items for establishing materiality (e.g. net assets, gross profit, etc.). 忠县勇京牛吵仍幕词开咙痛公尿房咐露汐给桓泻匈庞墓扛讼丛羹献鹃蚁源Auditing 521_WEEK_03Auditing 521_WEEK_03 Materiality Judgment Criteria- Qualitative considerations Small misstatements may be material in some cases. In particular: intentional misstatements, intentional violations of the law, or intentional earnings manipulation, ….must be considered material. 需推闻膊动话懂梳歉馒射各瓣架蒲烤沮详鞋谩沸禁氦艳脏焚饼签蓬魁彩容Auditing 521_WEEK_03Auditing 521_WEEK_03 Materiality Judgment Criteria - Qualitative considerations Small misstatement are also considered material if they: mask a change in earnings or other trends, hide a failure to meet analysts’ consensus expectations, change a loss into net income or vice versa, concern a segment of the business that is considered significant, e.g. if it is up for sale affect the auditee’s compliance with regulatory requirements, involve concealment of unlawful transactions, or have the effect of increasing management compensation, etc. 锡性紧铀嗡维扛数者挑缄好便过涡真逾负辜迹湘炎顾袒镀逼湾键淌妮肾坦Auditing 521_WEEK_03Auditing 521_WEEK_03 Materiality Judgment Auditors also consider: are there users that require very preci