The concept of materiality is fundamental to the audit of financial statements. Determined by auditors at the planning stage, it helps drive a more efficient and effective audit. Yet experience from practice – along with the outcomes of inspection findings and reviews – suggest that it is an area that poses practical challenges for auditors, and is one where improvements could be made.
Our new guide, Materiality In the Audit of Financial Statements, takes a closer look at the requirements on materiality in International Standards on Auditing (ISAs), specifically highlighting the important role that judgement plays and providing practical examples to help auditors understand and apply the ISA requirements, wherever they are based.
The guide looks at the areas of determining materiality, applying it to the evaluation of identified misstatements, materiality in group audits, what needs to be communicated to management and boards and what needs to be documented.
This is one of a number of practical guides written for a global audience. While aimed particularly at smaller audit firms, I hope that auditors in firms of all sizes will find this guide useful.