general, misstatements, including omissions, are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. The auditor‘s responsibility is to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with financial accounting standards. Judgments about materiality are made in the light of surrounding circumstances, and are affected by the auditor‘s perception of the financial information needs of users of the financial statements, and by the size or nature of a misstatement, or a combination of both. The auditor‘s opinion deals with the financial statements as a whole and therefore the auditor is not responsible for the detection of misstatements that are not material to the financial statements as a whole. As VAS 01, information shall be considered material in cases where the insufficiency or inaccuracy of such information may distort significantly the financial statements, thus affecting the economic decisions of the users of the financial statements. Materiality depends on the amounts and nature of information or errors assessed in particular circumstances. The materiality of information must be examined both quantitatively (size) and qualitatively (nature). In establishing materiality for an audit, the auditor should consider both quantitative and qualitative aspects of the engagement. Although materiality may be planned and implemented using a quantitative approach, the qualitative aspects of misstatements of small amounts may also materially affect the users of financial statements. For example, a client may illegally pay a commissioned agent to secure a sales contract. While the amount of the illegal payment may be immaterial to the financial statements, the disclosure of the illegal act may result in loss of the contract and substantial penalties that may be material. 2.2.2. Steps in Applying Materiality Standard on Auditing requires auditors apply materiality concept both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit
53 and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor‘s report. 184.108.40.206. Materiality in Planning audit In planning the audit, the auditor makes judgments about the size of misstatements that will be considered material. These judgments provide a basis for determining the nature, timing and extent of risk assessment procedures; identifying and assessing the risks of material misstatement; and determining the nature, timing and extent of further audit procedures. When establishing the overall audit strategy, the auditor shall determine materiality for the financial statements as a whole. If, in the specific circumstances of the entity, there is one or more particular classes of transactions, account balances or disclosures for which
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