Materiality – Knowsia

AAA – L3 – SA – Q5.6 – Audit evidence

What factors influence an auditor’s materiality decision?

Question

Which of the following will influence an auditor’s decision as to whether a matter is material?

1 Degree of approximation

2 Losses or low profits

3 Time of occurrence during the year

4 Offset and aggregation

A 1,2 and 3 only

B 1,3 and 4 only

C 2,3 and 4 only

D 1,2 and 4 only

Answer

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Tags: Aggregation, Approximation, Audit judgment, Materiality, Profitability
Level: Level 3

Topic: Audit Evidence

AAA – L3 – SA – Q2.6 – Materiality Benchmarks

Accepted benchmark for materiality.

Question

Which of the following is an accepted benchmark for materiality?

A 1-2% of pre-tax profit

B 1-2% of operating profit

C 5-10% of revenue

D 1-2% of total assets

Answer

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Tags: Audit Planning, Financial Benchmarks, ICAG, Materiality
Level: Level 3

Topic: Planning

AA – L2 – SA – Q5.3 – Materiality

Nature of materiality in auditing.

Question

Materiality is a matter of:

A Capacity

B Liquidity

C Profitability

D Judgment

Answer

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Tags: Audit Planning, ICAG, Materiality, Professional Judgment
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements

AA – L2 – SA – Q3.1 – Material Items Focus

Why auditors focus on material items in financial statements.

Question

Why do auditors concentrate their efforts on material items in the financial statements?

A Because they are easier to audit

B Because it reduces the audit time

C Because the risk to the financial statements of being materially misstated is greater

D Because the directors have asked for it

Answer

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Tags: Audit Risk, Financial Statements, ICAG, Materiality
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements

AA – L2 – SA – Q2.5 – Materiality

Identify what is not true about materiality.

Question

Which of the following is NOT true about materiality?

A Certain matters are always material

B Essentially materiality is a matter of judgment

C Matters that are not material should always be considered in isolation D Materiality affects sample size

Answer

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Tags: Audit Planning, ICAG, Judgment, Materiality, Sample Size
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements

PSAF – L2 – Q14.2- Sustainability Reporting Principles

Discuss five general principles of sustainability reporting in the public sector.

Question

(a) Discuss five general principles of sustainability reporting in the public sector.

(b) Explain four potential challenges of implementing sustainability reporting in the public sector.

Answer

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Tags: Accountability, Integration, Materiality, Public Sector, Stakeholder Engagement, Sustainability Reporting, Transparency
Level: Level 2

Topic: The context of public financial management

AAA – L3 – Q56 – Reporting

Discuss materiality, true and fair concepts, and auditor's report effects for Gifty Goods and Cecilia's Contracts.

Question

56 GG and CC

Described below are situations which have arisen in two unrelated audits and which are considered material.

(1) Gifty Goods

Although you are satisfied that closing inventories this year are fairly stated, the auditor’s report on the previous year’s financial statements was modified due to a restriction on the scope of the audit work in respect of the closing inventory figure. This led to a qualified opinion.

(2) Cecilia’s Contracts

The financial statements disclose the fact that a provision may be required to reduce inventories to their net realisable value if a contract with a major customer, representing 60% of the company’s revenue, is not renewed. A decision on this by the customer is not expected until after the financial statements are due to be signed.

Required

(a) State what is meant by, and explain the relationship between, the concepts of materiality and true and fair.

(b) State, with reasons, the effect on the auditor’s reports of the situations described above.

Answer

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Tags: Auditor’s Report, Financial Statements, Going Concern, Inventory, Materiality
Level: Level 3

Topic: Reporting

AAA – Dec 2019 – L3 – Q54 – Audit Reporting

Explain types of modified audit opinions with examples for each type.

Question

54 Eunice Pharmacies

(a) Explain the different types of modified audit opinions, giving an example of situations which may give rise to each type. (b) Set out the main elements of the auditor’s report for the situation set out above.

Answer

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Tags: Audit Evidence, Audit reporting, Financial Statements, Materiality, Modified audit opinions
Level: Level 3

Topic: Reporting

AAA – L3 – Q42 – Audit Evidence and Materiality

State audit testing procedures, criteria for using internal audit work, and materiality definition with audit stages.

Question

Required
(a) ISA 500 Audit Evidence identifies the different audit procedures that can be performed in order to obtain audit evidence.
Required
State, and briefly explain, five testing procedures that can be performed to obtain audit evidence.
(b) ISA 610 Using the Work of Internal Auditors explains when the work of the internal audit function can be used.
Required
State TWO criteria that the external auditor shall evaluate when assessing whether the work of the internal audit function can be used for the purposes of the audit.
(c) ISA 320 Audit Materiality provides guidance to the auditor on the concept of materiality and its relationship with audit risk.
Required
State a brief definition of materiality and state the two stages of the audit at which the auditor should consider materiality.

Answer

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Tags: Audit Evidence, Audit Risk, Internal Audit, ISA 320, ISA 500, ISA 610, Materiality, Testing procedures
Level: Level 3

Topic: Audit Evidence, Internal Audit and Outsourcing

AAA – L3 – Q23 – Audit Planning

Draft presentation sections on audit risk and materiality for Wonderful Stores' tender process.

Question

Your firm has been invited to tender for the audit of Marvelous Retail, a chain of twenty stores operating a sophisticated computerised inventory control and re-ordering system. Four other firms have also been invited to tender. As part of the tendering process, you have been asked to produce a written presentation.

Given the complex systems within its business, Marvelous Retail is particularly anxious to establish the ability of your audit procedures to deal with the business risks and has asked you to set out as part of your presentation, your approach concerning the following:

(1) Audit risk, and how your procedures would seek to address it to their business.

(2) Materiality, and how this might be applied.

Required

Draft the sections of the presentation to Marvelous Retail which deal with these two aspects of the audit approach.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Risk, Computerised Systems, Internal controls, Inventory Management, Materiality, Retail Audit
Level: Level 3

Topic: Planning

Tag (SQ): Materiality

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AAA – L3 – SA – Q5.6 – Audit evidence

What factors influence an auditor’s materiality decision?

AAA – L3 – SA – Q2.6 – Materiality Benchmarks

Accepted benchmark for materiality.

AA – L2 – SA – Q5.3 – Materiality

Nature of materiality in auditing.

AA – L2 – SA – Q3.1 – Material Items Focus

Why auditors focus on material items in financial statements.

AA – L2 – SA – Q2.5 – Materiality

Identify what is not true about materiality.

PSAF – L2 – Q14.2- Sustainability Reporting Principles

Discuss five general principles of sustainability reporting in the public sector.

AAA – L3 – Q56 – Reporting

Discuss materiality, true and fair concepts, and auditor's report effects for Gifty Goods and Cecilia's Contracts.

AAA – Dec 2019 – L3 – Q54 – Audit Reporting

Explain types of modified audit opinions with examples for each type.

AAA – L3 – Q42 – Audit Evidence and Materiality

State audit testing procedures, criteria for using internal audit work, and materiality definition with audit stages.

AAA – L3 – Q23 – Audit Planning

Draft presentation sections on audit risk and materiality for Wonderful Stores' tender process.

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Tag (SQ): Materiality

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AAA – L3 – SA – Q5.6 – Audit evidence

What factors influence an auditor’s materiality decision?

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AAA – L3 – SA – Q2.6 – Materiality Benchmarks

Accepted benchmark for materiality.

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AA – L2 – SA – Q5.3 – Materiality

Nature of materiality in auditing.

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AA – L2 – SA – Q3.1 – Material Items Focus

Why auditors focus on material items in financial statements.

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AA – L2 – SA – Q2.5 – Materiality

Identify what is not true about materiality.

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PSAF – L2 – Q14.2- Sustainability Reporting Principles

Discuss five general principles of sustainability reporting in the public sector.

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AAA – L3 – Q56 – Reporting

Discuss materiality, true and fair concepts, and auditor's report effects for Gifty Goods and Cecilia's Contracts.

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AAA – Dec 2019 – L3 – Q54 – Audit Reporting

Explain types of modified audit opinions with examples for each type.

You're reporting an error for "AAA – Dec 2019 – L3 – Q54 – Audit Reporting"

AAA – L3 – Q42 – Audit Evidence and Materiality

State audit testing procedures, criteria for using internal audit work, and materiality definition with audit stages.

You're reporting an error for "AAA – L3 – Q42 – Audit Evidence and Materiality"

AAA – L3 – Q23 – Audit Planning

Draft presentation sections on audit risk and materiality for Wonderful Stores' tender process.

You're reporting an error for "AAA – L3 – Q23 – Audit Planning"

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Customer

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