Materiality in Auditing Essay Example | Topics and Well Written Essays - 2000 words - 7

Materiality in Auditing - Essay Example Financial mistakes are not always unintentional instead there is a culture of making misstatements in accounting due many reasons including unexpected errors, mistakes or negligence level of misstatement and/or fraud cases. Pointing out and examining the level of misstatement and its impact on the whole financial performance is one of the major concerns of auditors. Rittenberg, Johnstone, and Grambling (2011) suggested that the point or level of misstatements or materiality in data possess high concerns of auditors’ judgments and experience. The term â€Å"materiality† refers to the acceptable level of misstatement according to the experience and judgments of the auditors that do not affect the decisions of financial statement readers (Financial Accounting Standard Board). It sounds vague that a highly sensitive document and its materiality issues are left only to the judgments and knowledge of the auditors. Unfortunately, it is widely practiced and kept secret by the auditors as stated by Mock, at el (2009). The gaps in the phenomena are vital and should be covered with identifiable measures. It is necessary to develop a level of understanding for establishing accurate measures to address the problem. For the purpose of getting deep insight of the matter of materiality in auditing, the piece of writing is crafted to define and discuss wider aspects of materiality. The importance of materiality is apparent in the making of financial statement. International Accounting Standard board’s conceptual framework for preparing financial statements defined materiality as the data become â€Å"material† if its alteration or omission affects the stakeholders’ decisions (Todea, Joldos, and Cioca, 2013). To elaborate materiality is the cut-off point of accepting material data to the level up to which it does not impact in decision-making via financial statement drivers. Although, IASB

Auditing Essay Example | Topics and Well Written Essays - 2000 words - 5

Auditing - Essay Example The evaluation of the audit risks involved in the audit of the company is analyzed and thus explained their extent and effect. Along with the inherent risks of audit there are various other risks that are involved in the audit of a company. Auditors check for material misstatement in the financial statements and report accordingly. However there are risks involved in audit which are inherent risks as the management of the company is involved in the operations and recording of the transactions and thus provide assertions upon the financial statements of the company and thus the auditors are to check the assertions as well. The audit risks involved in the audit of Mobile Streams Plc. is elaborated below: The company is operating as a group and the financial statements prepared and presented are of the parent and of the group. The risk of disclosure of the related party disclosures along with the measurements of the holding percentages shall be a risky element in the financial statements. Mobile Streams Plc. undergoes complex, diverse and decentralized business operations as it is operating as a group and these characteristics increases the risk of material misstatements (C. WILLIAM & PHIL, 2013). Along with the management and disclosures of the complex accounting treatments there is a risk that accounting for the consolidation in the group shall not be properly accounted for as the local accounting treatments are different as to the level of adoption of financial reporting standards. The consolidation of the financial statements increases the risk as the financial information is obtained from different segments and then consolidated and the acquisition of information from wide sourc e increases the risk of misstatement. Consolidating the accounts of parent and subsidiary is a complex accounting treatment and thus increases the audit risks as per the