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Assignment 7-3 Types of Audit Tests

Assignment 7-3 Types of Audit Tests - planning materiality...

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Assignment 7-3 Types of Audit Tests Chapter 3 3-12. List and describe the three major steps in applying materiality to an audit. - Step 1: Determine a materiality level for the overall financial statements. – When establishing the overall strategy, the auditor should establish a materiality level for the financial statements taken as a whole. Planning materiality is the maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of users. - Step 2: Determine Tolerable Misstatement. – This involves determining tolerable misstatement based on planning materiality. Tolerable misstatement is the amount of
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Unformatted text preview: planning materiality that is allocated to an account or class of transactions. The purpose of allocating a portion of planning materiality is to establish a scope for the audit procedures for the individual account balance or class of transactions. -Step 3: Evaluate Audit Findings. – This is completed near the end of the audit, when the auditor evaluates all the evidence that has been gathered. Based on the results of the audit procedures conducted, the auditor aggregates misstatements from each account or class of transactions....
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