Materiality is a major consideration in determining the appropriate audit report to issue. Financial Accounting Standards Board (FASB) Concept Statement 2 defines materiality as: The magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.

Required:

Identify the steps in applying the materiality concept (ILOS (1.9), (2.9), (3.9))