ISA 320 (2) Flashcards
What is materiality also central to?
To assessment of individual audit risks
What does auditor bear in mind when assessing risks?
Not just the misstatements that could arise, but whether these misstatements would be material
What is the auditor able to?
Direct their work to those areas that matter the most for the audit as a whole
What happens during audit planning?
The auditor establishes materiality for the financial statements as a whole by exercising judgment
Revenue percentage
1/2 to 1
Total assets percentage
1 to 2
Profit before tax percentage
5 to 10
What does percentage chosen depend on?
The confidence the auditor has in the client’s figure, uses the financial statements will be put to and any other factors affecting auditor’s judgment
What happens once materiality level for financial statements as a whole is set?
What would happen if materiality level was directly to account balances
Example of account balances?
Receivables and inventory