ACCT 107 Lecture Notes - Lecture 11: Audit Risk, Financial Statement
6 Oct 2020
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Document Summary
Major consideration in determining the appropriate audit report. Auditor"s responsibility = determine whether financial statements are materially. Auditor will bring material misstatements to the client"s attention so corrections misstated can be made. The preliminary judgment about materiality as a whole is the maximum amount by which the auditor believes the statements could be misstated and still not affect the decisions of reasonable users. Auditors set materiality thresholds early in the engagement. Thresholds represent the maximum statements that could be misstated and still not affect users decisions. Materiality is a relative rather than absolute concept. Accounting and auditing standards do not provide specific materiality guidelines. Professional judgment is used to set and apply materiality guidelines. Allocate preliminary judgment about materiality to segments. Evidence is accumulated by segments rather than for the financial statements as a whole. Most practitioners allocate materiality to balance sheet accounts. Auditor can determine the misstated amount in an account ( known )
