Materiality and Audit Adjustments
- Topics:
- Audits
- Tags:
- Accounting,
- Audit,
- Finance,
- Financial Accounting
- Source:
- The CPA Journal
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Overview: Perhaps the most authoritative definition of materiality is found in Financial Accounting Concepts Statement 2, Qualitative Characteristics of Accounting Information: “The magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.” Because materiality is the foundation of almost all judgments made during an audit and because it is so vaguely defined, there is enormous latitude and variation in its application. External auditors consider materiality at three points in their audit of financial statements: during planning, while evaluating audit differences in the field, and during review of the audit (AU 312).
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Format: HTML | Date: Apr 2002 | Pages: 1
