Audit Chapter 11 Materiality

Question 1

If an auditor calculates materiality, of 3% of 1M = 30k, what does this mean?

Answer 1

If total misstatement is greater than 30k, then the auditor must perform futher tests. If total misstatement is less than 30k, this is considered acceptable.

Question 2

What is specific materiality

Answer 2

Specific materiality is a materiality amount for a specific class or balance on the financial statement because the entity is particularly vulnerable to that class or balance for whatever reason (ex. PPE)

Question 3

FIGURE OUT WHERE STEPS ARE FOR CALCULATING MATERIALITY IN KNOTIA HANDBOOK (AUDIT). VERY IMPORTANT. Materiality percentages not in handbook. Also, not all 8 steps in handbook. Maybe need to memorize.