Week 6 Case Study
Case 7. one particular
1a. Materiality needs to be based in different ways when determining planning materiality because every single business is different and every department in the financial statements need to be address in different ways. Also, certain departments can have a higher materiality charge as others; such as current assets or current liabilities. Net income and total assets is usually an area in the financial transactions where substantialness should not be greater than 2% substantialness. Financial details is ready for multiple users for most different reasons. 1b. Materiality is a relative rather than an absolute concept therefore it is always different. Thresholds could be influential to numerous different users of the economical statements and they will vary based on how the business compares to others in the same industry. Likewise, misstatement of $1, 500 to a significant company is not material whereas $1, 000 to a smaller organization could be considered material. 1c. The materiality base while using smallest threshold is generally used because it is critical that the auditors find little misstatements that may ultimately influence users from the financial claims. Plus, in the event that they get many little misstatements in the financial transactions, they can add up to generate a huge impact on the financial statements. 1d. Risk of management fraud is considered when determining endurable misstatements mainly because management fraudulence makes it much more likely that individual accounts misstatements could have the same result as they carry out on net gain. On the other side of this though is that if there is a low likelihood of managing fraud, this makes it much more likely that the individual accounts may have an offsetting effect on net gain. 1e. I do think the biggest reason so why auditors do not use the same tolerable misstatement amounts or percentages of account balances for all economical statement accounts is because not all statements have a big effect on net...