Materiality - Materiality Click to edit Master subtitle...

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Click to edit Master subtitle style 8/22/11 Materiality
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8/22/11 Last time Planning of the audit Gain an understanding of client’s business Identify risks (inherent risk, going- concern risk) Assess client response to risk (internal controls, control risk) Develop an audit plan
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8/22/11 Things to consider Note 1: The purpose of planning is to develop an audit plan to detect material misstatements. Note 2: The risks we are concerned about include the risk of a material misstatement occurring (IR) and the risk of a material misstatement getting past the client’s internal
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8/22/11 WHAT IS MATERIAL? Materiality: The magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, make it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.
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8/22/11 MATERIALITY IS MATTER OF A PROFESSIONAL JUDGMENT!
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8/22/11 Materiality uses As a planning tool to ensure that we design our audit procedures to detect only material misstatements (and don’t waste time looking for immaterial misstatements) Which accounts and items to look at How many items to look at
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8/22/11 Determining preliminary materiality Two main approaches Rule of thumb Using pre-designed tables
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This note was uploaded on 08/22/2011 for the course ACIS 3414 taught by Professor Yardley during the Spring '08 term at Virginia Tech.

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Materiality - Materiality Click to edit Master subtitle...

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