Materiality is a term commonly used in Audit Reports. So what is materiality ? How to determine materiality? Please refer to related information in the following article of MISA MeInvoice .
Note: Before learning about materiality in auditing, you can learn in advance the information you need to know about auditing in the article below.
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1. What is materiality?
2. The impact of materiality on auditors
3. How to determine the level of significance
4. How to determine materiality and performance materiality when planning an audit
How to modify materiality levels during the audit
According to VSA 320 – Vietnamese Auditing Standards, the term “materiality level” in planning and performing an Audit is understood as follows:
Materiality is a term used to express the importance of a piece of information (an accounting figure) in a financial report. Information is considered material if its absence or lack of accuracy would affect the economic decisions of users of the financial report.
Materiality is a value level determined by the auditor italy telegram data depending on the importance and nature of the information or error assessed in the specific circumstances. Materiality is considered a threshold, a cutting point, not the content of the information required. The materiality of information must be
considered both quantitatively and qualitatively.
In general, materiality is understood as follows:
– Are errors, including omissions, that when a program to motivate considered individually or in the aggregate, considered at a reasonable level, could influence china data the economic decisions of users of financial statements;
– Are judgments about materiality made in specific circumstances, and are influenced by the size or nature of the error or a combination of both;
– Judgments about matters that are important to users of financial statements must be based on consideration of the general financial information needs of the user group, such as investors, banks, creditors, etc. The possible effects of errors on a small number of users of information on financial statements whose needs are much different from the majority of users of information on financial
statements will not be considered.
2. The impact of materiality on auditors
Determining materiality is a matter of professional judgment and depends on the auditor’s perception of the needs of users of the financial statements. In determining materiality, the auditor may assume that users of the financial statements:
– Have a reasonable understanding of business operations, economic and financial situations, accounting and be interested in studying information in financial statements with reasonable care;
– Understand that financial statements are prepared, presented and audited on a materiality basis;
– Recognize the inherent uncertainty in determining value due to the use of accounting estimates,
judgments and factors in future events
– Make sound economic decisions based on information in financial statements.
The objective of auditors or audit firms is to apply the concept of materiality when planning and performing audits appropriately.
3. How to determine the level of significance
A) the materiality level for the financial. Statements or audited financial information.as a whole is the maximum value of all errors .in the financial statements or. Audited financial information that the. Auditor believes that from that level down. The financial statements may be. Incorrect but have not yet affected the decisions of the information users.
B) the materiality level for the financial .statements as a whole is determined based on. The selected criterion value and the percentage (%) corresponding to that criterion value.