BUS 426 Study Guide - Midterm Guide: Financial Audit, Audit Risk, Financial Statement

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 426
• Professor: Craig Emby

Document Summary

Materiality and risk: be able to explain what materiality is. Misstatements, including omissions, are considered to be material if they affect the financial statement users to make decisions and judgements: be able to explain the process of estimating materiality (qualitative and quantitative) in the audit. A potential effect of the materiality on trends, especially on profitability. A misstatement that changes loss into income, or vice versa. The pote(cid:374)tial effe(cid:272)t of the (cid:373)isstate(cid:373)e(cid:374)t o(cid:374) e(cid:374)tity"s (cid:272)o(cid:373)plia(cid:374)(cid:272)e (cid:449)ith de(cid:271)t (cid:272)o(cid:448)e(cid:374)a(cid:374)ts, contractual obligations, and regulatory provisions. The existence of statutory reporting requirements that affect materiality thresholds. A (cid:373)isstate(cid:373)e(cid:374)t that has the effe(cid:272)t of i(cid:374)(cid:272)(cid:396)easi(cid:374)g the (cid:373)a(cid:374)age(cid:373)e(cid:374)t"s (cid:272)o(cid:373)pe(cid:374)satio(cid:374) The significance of the misstatement or disclosures relative to the performance measures such as earnings per share or net income relative to expectations. The motivation of management with respect to the misstatement such as managing earnings or smoothing earning trends: be able to distinguish between overall materiality and performance materiality.