Class 2 - Materiality

Question 1

Materiality judgements

Answer 1

Made in light of surrounding circumstances and are affected by the size or nature of a misstament or both

possible influences on economic users are based on a common financial informtion needs of users as a group ( effects on spefic inviduals are not considered)

Question 2

Auditor assumptions of users

Answer 2

have reasonable knowledge about the business, industry, and accouting and study the financial statements with reasonable diligence

Understand the financial statements are prepared presented and audited to levels of materiality

Recognize the uncertainties inherent in the measurement of amounts based on the use of estimations, judgment

make reasonable economic decisions with the financial statement information

Question 3

Materiality consequence

Answer 3

the materiality determined does not necessarily establish an amount below which uncorrected misstatements, individually or in the aggregate, will always be evaluated as immaterial

Question 4

Determining Performance Materiality

Answer 4

below overall materiality to reduce to a appropriate low level the probability that the agreggate of uncorrected and undected misstatements exceeds overall materiality

Provide a safety net against the risk of undetected misstatements

weak internal control –> low performance level

Question 5

Clearly Trivial Amount

Answer 5

A low percentage of overall materiality. it is the value which will not be considered as material misstatements

Question 6

Assertions

Answer 6

Used by the auditor to consider the different types of potential misstatements that may occur when identifying, assessing, and responding to the risks of material misstatements.

Question 7

Assertions - accounts balance and related disclosures at the period

Answer 7

Existence - Assets, liabilities, equity interests exists

rights and obligations - the entity holds and controls the rights to asset and obligations

completeness - all assets, liabilities, equity interest that should be recorded are recorded and all related disclosures are included

accuracy, valuation, and allocation - all 3 are at the appropriate amount, and any valuation or allocation adjustments have been properly recorded and related disclosures all well measured and described

classification - all 3 are in the proper accounts

presentation - all 3 are appropriately aggregated or disaggregated and cleary described in the financial statements

Question 8

assertions - classes of transactions and events and related disclosures for the period

Answer 8

occurrence - transactions and events that have been occurred really occurred and belong to the entity

completeness - all that should be recorded were recorded and all related disclosures are included in the financial statements

accuracy - events and transactions recorded by the right amounts and related disclosures have been well measired and described

cutoff - transaction and events recorded in the correct accounting period

classification - recorded in the right accounts

presentation - properly agreggtaed or disagregated and clearly describedand related disclosures are relevant and understandable in the financial reporting framework context