Question

Based on new information gained during an audit of a nonissuer, an auditor determines that it is necessary to modify materiality for the financial statements as a whole. In this circumstance, which of the following statements is accurate?
A. The auditor is required to reperform audit procedures already completed on the audit using the revised materiality.
B. The auditor should consider disclaiming an opinion due to a scope limitation.
C. The revision of materiality at the financial statement level will not affect the planned nature and timing of audit procedures, only the extent of those procedures.
D. Materiality levels for particular classes of transactions, account balances, or disclosures might also need to be revised.

Answer 1

Answer:

The correct answer is D. Materiality levels for particular classes of transactions, account balances, or disclosures might also need to be revised.

Explanation:

The need for less materiality for significant account / disclosure may occur infrequently; however, it may be appropriate in certain circumstances. The materiality of performance related to a lower materiality for the significant account / disclosure is set to reduce to an adequately low level the probability that the sum of the errors not corrected and not detected in that significant account or particular disclosure exceeds the materiality Minor account / significant disclosure.

We must document the minor amount of the materiality of the significant account / disclosure, if applicable, for each specific significant account or disclosure and the factors considered in its determination.

Materiality Modification

The materiality for the financial statements taken together (and, if applicable, the lower materiality for the significant account / disclosure) may be modified as a result of:

1. A change in circumstances that occurred during the audit.  New information, or
2. A change in our understanding of the entity and its operations as a result of performing additional audit procedures.