The audit report provides reasonable assurance that the financial statements are free from material misstatements. The auditor assesses materiality in planning the audit to ensure that sufficient appropriate audit work is performed to detect material misstatements. However, the auditor is in a difficult situation because materiality is defined from a user’s viewpoint.
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, and

(3) The perspective of a particular user. Give an example of each.
c. Once the auditor develops an assessment of planning 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 the auditor has already completed?