BU477 Chapter Notes - Chapter 7: Audit Risk, Audit Evidence, Specific Performance

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5 Feb 2017
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Cas 320: omissions, misstatements that are considered material are when they have a considerable amount of influence on economic decisions. Judgements on what is considered material is based on common financial information needs of the users as a group and not individual parties. Also, look at the size and nature of misstatement. Tough to assign a dollar value amount because misstatements for smaller companies aren"t as important for big companies. Materiality: magnitude of omission or misstatement of information that would have made it probably that the information would have changed a person"s decision making. Planning, evaluating, the results and reporting decisions. If auditor feels there is a material misstatement will bring it to client"s attention, if client refuses to correct then a modified opinion is issued. Planning the audit: overall materiality, tolerable misstatement. Evaluating results: estimate misstatement in segment, estimate combined misstatement. Complete the audit: conclude overall reasonableness, report those in charge. Performance materiality considers potentially undetected material errors.

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