• 2 Marks

AA – May 2021 – L2 – Q1c – Audit and Assurance Risk Environment, Audit and Assurance Evidence

State instances where the auditor applies the concept of materiality.

Materiality is a fundamental concept in both auditing and accounting. The Framework for the preparation of financial statements states that information is material if its omission, misstatement, or non-disclosure could influence the economic decisions of users taken based on the financial statements.

Required:
State TWO (2) instances which require the Auditor to apply the concept of materiality. (2 marks)

Instances where the concept of materiality is applied:

  • When planning and performing the audit.
  • During the testing of items in the course of the audit.
  • When evaluating the effects of misstatements on the financial statements and therefore on the audit opinion.
    (Any 2 points for 2 marks)
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