Materiality Flashcards
1
Q
Qualitative Factors that may affect judgement:
A
- Fraud possibility
- Debt Covenants
- Trends
2
Q
Quantitative “Rules of Thumb”
A
- 5% of operating income
- 1% of total assets
- 1% of revenues
- Sliding Scale
3
Q
Evaluating Materiality
A
Combine all detected and projected errors and compare to final materiality measure
4
Q
Allowable Audit Risk Formula
A
= Inherent Risk x Control Risk x Planned Detection Risk
5
Q
Allowable audit risk:
A
risk of issuing an unmodified opinion on FS that are materially misstated.
6
Q
Tolerable misstatement
A
Materiality is allocated among the components of the F/S
7
Q
Confept of Materality
A
Is professional judgement
