Question

Explain materiality as it applies to a financial statement audit.

Answer 1

Please give positive ratings so I can keep answering. If you have any queries please comment. Thanks!

Materiality is a concept in auditing which relates to the significance of an amount, transaction or error. The objective of an audit of financial statement is to enable the auditor to express an opinion whether the financial statements are prepared, in all material aspects, in conformity with the financial reporting framework or Generally Accepted Accounting Policies (GAAP).

In general the misstatements, including omissions are considered to be material if, individually or in the aggregate could reasonably be expected to influence the economic decisions of users taken on the basis of financial statements. Judgements about materiality are made in the light of financial information needs of users of financial statements or by the size and nature of misstatements.