What do you and your audit team need to consider when making the preliminary assessment of...

What do you and your audit team need to consider when making the preliminary assessment of materiality?

Expert Solution

When planning the audit, the auditor considers what would make the financial report materially misstated. The auditor’s assessment of materiality, related to specific account balances and classes of transactions, helps the auditor to select audit procedures that, in combination, can be expected to reduce audit risk to an acceptably low level.

The auditor makes a preliminary assessment of materiality to establish an appropriate quantitative materiality level to plan audit procedures and selection strategies. Ordinarily the auditor considers prior year financial results, year-to-date results and balances, and budgets or forecasts for the financial period to establish a preliminary materiality level for planning the audit.

When establishing a preliminary assessment of materiality the auditor has regard to:

(a) the reliability of management information;

(b) any factors which may indicate deviations from normal activities;

(c) qualitative factors

ekkarill92 answered 1 year ago

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