Question

If new information becomes available that could require a reevaluation of the quantitative level of materiality applied during an audit of an issuer, then the auditor should?

Answer 1

If new information becomes available that could require a reevaluation of the quantitative level of materiality applied during an audit of an issuer, then the auditor should raise or lower the materiality level as appropriate to the situation.

What does materiality level mean?

• The concept of "materiality" refers to the point at which incomplete or inaccurate information in financial statements is seen to have an effect on users' decision-making.
• The auditors may not execute enough audit procedures to find a material misrepresentation if the materiality standard is set too high. However, if it is too low, auditors can end up working harder than necessary.
• Auditors use professional judgment and general guidelines to determine a materiality level. They also take into account the degree and kind of misrepresentation. The materiality criterion is sometimes expressed as a broad percentage of a particular line item on the financial statement.
• The benchmark used to acquire a reasonable level of certainty that an audit will not find any serious inaccuracies that could materially impair the usefulness of financial statements is known as the materiality threshold in audits.

If new information becomes available that could require a reevaluation of the quantitative level of materiality applied during an audit of an issuer, then the auditor should raise or lower the materiality level as appropriate to the situation.

To learn more about materiality level, refer to:

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