ZuoTi.Pro
Question

“Material” has a different definition in accounting than it does in everyday life. What does “material”...

“Material” has a different definition in accounting than it does in everyday life. What does “material” mean in the context of an audit, and who determines whether an item is material? How does the materiality of an item affect the acceptable and inherent risk borne by an audited company?

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
"Material" in context of audit means that these items are more important than the other items in the financial statements. So, the concept of materiality states that some matters will be more important than the rest of the matters , either individually or collectively for the true and fair representation of the financial statements and is within the scope of GAAP. Materiality is defined by the auditor on the basis of the various factors.
Materaality of a matter affects the acceptable and inherent risk borne by the audited company . The relationship between the two is inversely related i.e higher the materiality lower will be the risk and vice versa.
0 0
Add a comment
Know the answer?
Add Answer to:
“Material” has a different definition in accounting than it does in everyday life. What does “material”...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Answer the Following Questions in detail 1. Differentiate between “Auditing” and “Accounting” . 2. What are...

    Answer the Following Questions in detail 1. Differentiate between “Auditing” and “Accounting” . 2. What are different Types of Risks? Explain the importance of auditing in reducing information risk, the causes of information risk, and explain how this risk can be reduced. 3. What do you understand by Quality Control Standards & Practices within the Accounting Profession? 4. What do you understand by the term “Audit Report”? 5. What the 4 Categories of Audit Report? Briefly Explain 6. What is...

  • Chapter 5 & 6- Basics of the Audit Understand the different types of procedures (analytics, sampling, year end, interim work)- what they mean, being able to identify examples. (If I give you a pro...

    Chapter 5 & 6- Basics of the Audit Understand the different types of procedures (analytics, sampling, year end, interim work)- what they mean, being able to identify examples. (If I give you a procedure can you determine if it is an analytical procedure, work performed at interim, etc.) Understanding the audit risk model- what it means to asses risk as high, moderate, low, or maximum. (Do you do more or less work) (If I change one part of the formula...

  • Chapter 5 & 6- Basics of the Audit Understand the different types of procedures (analytics, sampling,...

    Chapter 5 & 6- Basics of the Audit Understand the different types of procedures (analytics, sampling, year end, interim work)- what they mean, being able to identify examples. (If I give you a procedure can you determine if it is an analytical procedure, work performed at interim, etc.) Understanding the audit risk model- what it means to asses risk as high, moderate, low, or maximum. (Do you do more or less work) (If I change one part of the formula...

  • Audit Risk Model. Audit risks for particular accounts and disclosures can be conceptualized in the model:...

    Audit Risk Model. Audit risks for particular accounts and disclosures can be conceptualized in the model: Audit risk (AR) Inherent risk (IR) x Control risk (CR) x Detection risk (DR). Use this model as a framework for considering the following situations and deciding whether the auditor's conclusion is appropriate. a. Paul, CPA, has participated in the audit of Tordik Cheese Company for five years, first as an assistant accountant and the last two years as the senior accountant. Paul has...

  • One factor and the effect on the risk of material misstatement 9-38 (oBJECTIVES 9.5,9-6, 9.7) Whitehead,...

    One factor and the effect on the risk of material misstatement 9-38 (oBJECTIVES 9.5,9-6, 9.7) Whitehead, CPA, is planning the audit of a newly obtained client, Henderson Energy Corporation, for the year ended December 31, 2016. Henderson Energy is regulated by the state utility commission, and because it is a publicly traded company the audited financial statements must be filed with the Securities and Exchange Commission (SEC). Henderson Energy is considerably more profitable than many of its competitors argely due...

  • 1. Define internal control. 2. Internal control provides reasonable assurance. Explain. 3. What are the objectives...

    1. Define internal control. 2. Internal control provides reasonable assurance. Explain. 3. What are the objectives of a system of internal control? 4. Enumerate, and explain briefly, the components of an internal control. 5. What is the control environment? What are the elements that comprise the control environment? 6. What is meant by risk assessment process? 7. What is an information system? 8. What are control activities? 9. Give the different types of control activities. 10. Why is it necessary...

  • 2019 Audit of Beta Industries: Summary Information Assume you are an audit manager, today is May...

    2019 Audit of Beta Industries: Summary Information Assume you are an audit manager, today is May 15, 2019, and your public accounting firm is currently planning the 2019 financial statement audit of Beta Home Goods, a retailer in the home goods and supply industry. Beta is a public company with a 12/31 year-end, and a new client for your firm. The audit partner has asked you to help plan the audit for this new client using the following information obtained...

  • The limitations of an audit are NOT caused by ________. A. the nature of financial reporting....

    The limitations of an audit are NOT caused by ________. A. the nature of financial reporting. B. the nature of audit procedures. C. the need for the audit to be conducted within a reasonable period of time at a reasonable cost. D. a guarantee that the financial statements are free from error 2.5 points QUESTION 4 In an unqualified audit report on the financial statements of a public company, ACC562what does the first statement of the opinion paragraph state? A....

  • Payroll Expense Handout You work for the accounting firm of D&E and are currently assigned to...

    Payroll Expense Handout You work for the accounting firm of D&E and are currently assigned to the audit of Kiwi Company for the year ended 6/30/2013. You have been assigned to audit payroll expense which totals $68,257,321.01 for the year ended 6/30/2013. You know that payroll expense has been assessed as low risk based on favorable results from the tests of controls. Because risks are low and plausible relationships exist that are sufficiently stable and predictive, the auditors plan to...

  • 25-20 (Objective 25-8) The following questions concern reports issued by auditors, other than those on historical...

    25-20 (Objective 25-8) The following questions concern reports issued by auditors, other than those on historical financial statements. Choose the best response. a. An auditor is reporting on cash basis financial statements. These statements are best referred to in the opinion of the auditor by which of the following descriptions? (1) Cash receipts and disbursements and the assets and liabilities arising from cash transactions. (2) Financial position and results of operations arising from cash transactions. (3) Balance sheet and income...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT