Prior to the withdrawal of AASB 1031 and with reference to the AASB 1031 Materia

Question

Prior to the withdrawal of AASB 1031 and with reference to the AASB 1031 Materiality (issued by the Australian Accounting Standards Boards - AASB) and the ASA 320 Materiality in Planning and Performing an Audit and ASA 450 Evaluation of Misstatements Identified during an Audit (issued by the Auditing and Assurance Standards Board – AUASB), (15 Marks):
a. Define materiality.
b. Outline the qualitative and quantitative guidelines of materiality.
c. How the concepts and constructs of “materiality” influence the auditors’ professional judgment on misstatements

Explanation / Answer

                Quantative: percentage of production or sales volume, percentage of total capacity, percentage yield or efficiency factors.

3. If there are multiple small amounts which are wrong it may accumulate to be material for the auditors judgement in which case he may have to alter his audit approach and be more specific to the events verficiation

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