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Auditing

1.Materiality meaning how a misstatement would affect the decisions of a reasonable informed user of the financial statements. The auditor considers materiality while planning, conduction, and evaluating the audit.
2.Individual item materiality concerns the impact of a single misstatement on the financial statements. Aggregate materiality is the total effect of two or more misstatements.
3.The errors could affect aggregate materiality by affecting the total operating cost and net income by significant numbers.
4.The auditor must consider both quantitative and qualitative factors in establishing thresholds for the financial statements. The auditor must consider all qualitative materiality factors as they arise during substantive testing and evaluate their overall implications during the evaluation.
5.The relationships are important in the development of audit programs because it is critical to the exercise of due care and to the maintenance of an attitude of professional skepticism in planning and conducting the audit.
6.Errors are unintentional mistakes such as omissions excluded from the balance sheet. Fraud is intentional and may involve misappropriations of fraudulent financial reporting.
7.The auditor meets the requirement by following SAS 82 that provides guidance to the auditor in accessing the risk of fraud and responding to the assessment.
8.Audit Risk is “the risk auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated.” Inherent Risk “relates to the susceptibility of an assertion to a material misstatement assuming that there are no related controls.” Control Risk is “the risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal control.” Detection Risk is “the risk that the auditor will not detect a material misstatement that exists in an assertion.
9.Materiality is related to audit risk by...