ISA 320 (2)

Question 1

What is materiality also central to?

Answer 1

To assessment of individual audit risks

Question 2

What does auditor bear in mind when assessing risks?

Answer 2

Not just the misstatements that could arise, but whether these misstatements would be material

Question 3

What is the auditor able to?

Answer 3

Direct their work to those areas that matter the most for the audit as a whole

Question 4

What happens during audit planning?

Answer 4

The auditor establishes materiality for the financial statements as a whole by exercising judgment

Question 5

Revenue percentage

Answer 5

1/2 to 1

Question 6

Total assets percentage

Answer 6

1 to 2

Question 7

Profit before tax percentage

Answer 7

5 to 10

Question 8

What does percentage chosen depend on?

Answer 8

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

Question 9

What happens once materiality level for financial statements as a whole is set?

Answer 9

What would happen if materiality level was directly to account balances

Question 10

Example of account balances?

Answer 10

Receivables and inventory