The audit report provides reasonable assurance that the financial statements are free from material misstatements. The auditor
Question:
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 planning 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 magnitude 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.
The audit report is issued by a certified public accountant who is appointed by the shareholders to provide assurance upon the truth and fairness of the financial statements prepared by the managers of the company. Audit report contains the... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg