Judgments about materiality are made in light of surrounding circumstances, and materiality are affected by the size or nature of a misstatement, or a combination of both.
Key Terms
materiality
(重要性) (实际执行的重要性，重要性水平) (可容忍错报) (重要性的初步判断)
performance materiality tolerable misstatement
preliminary judgement about materiality total misstatement (错报总额)
(4) estimate the combined misstatement; The final two steps are done near (5) compare combined estimate with preliminary the end of the audit during the engagement completion phase. or revised performance materiality.
The first two are done (2) allocate preliminary performance materiality as part of planning. to segments;
(3) estimate total misstatement in segment; The third takes place thrity
In applying the concept of materiality in practice, auditors normally perform five closely related steps:
(1) set preliminary performance materiality;
2. Identify the steps auditors follow in applying the concept of materiality.
3. Explain how auditors apply materiality at the planning phase of an audit. Explain the considerations that should be given by auditors when determining performance materiality. 4. Explain the relationship between materiality and audit evidence. 5. Define tolerable misstatement and explain how it is used in audit practice. 6. Describe how auditors use materiality in examining the accounts and completing the audit.
Performance materiality means the amount or amounts set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. If applicable, performance materiality also refers to the amount or amounts set by the auditor at less than the materiality level or levels for particular classes of transactions, account balances or disclosures.
23-2 Preliminary Judgement About Materiality
In planning the audit, the auditor makes judgements about the size of misstatements taht will be considered material, i.e. , to determine the performance materiality, as the first step of applying materiality in audit practice.
Unit 23 Materiality
Learning Objectives
After studying this unit, you should be able to:
1. Define materiality and state the significance of this concept to the audit of financial statements.
Materiality
Materiality, in the context of the preparation and presentation of financial statements, refers to the magnitude of misstatement of accounting information. Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.