A2M7

Question 1

When assessing the materiality level for the FS taken as a whole

Answer 1

The auditor needs to determine an actual materiality threshold amount for the client’s audit

Question 2

Determining a tolerable misstatement is a matter of the auditor’s professional judgement

Answer 2

Any prior period misstatements may result in the auditor needing to reduce the tolerable misstatement to reduce the probability that the aggregate uncorrected and undetected misstatements exceed the materiality for the GS to an acceptably low level

Question 3

If there is a high likelihood of misstatements then the auditor sets materiality at a lower amount

An auditor thinks that theirs a high likelihood of uncorrected and undetected misstatements. So then the auditor will use a % closet to the lower end of the range provided in firm guidance.

Answer 3

which results in the auditor looking closer at audit evidence

Question 4

Overall FS Materiality

Answer 4

Applicable benchmark X Applicable %

Question 5

Performance Materiality

Answer 5

Overall materiality X Applicable %

Question 6

Users of FS are most interested in earnings

Answer 6

so the benchmark that should be used would be Profit before tax