Define materiality as used in accounting and auditing

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The audit report provides reasonable assurance that the financial statements are free from material misstatements. The auditor is put in a difficult situation because materiality is defined from a user's viewpoint, but the auditor must assess materiality in plan- ning the audit to ensure that sufficient audit work is performed to detect material misstatements.

a. Define materiality as used in accounting and auditing, particularly emphasizing the differences that exist between the FASB and the U.S. Supreme Court materiality definitions.

b. Three major dimensions of materiality are (1) the dollar magni- tude of the item, (2) the nature of the item under consideration,
(3) the perspective of a particular user. Give an example of each.

c. Once the auditor develops an assessment of materiality, can it change during the course of the audit? Explain. If it does change, what is the implication of a change for audit work that has already been completed? Explain.

Reference no: EM13886910

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