Video: Introduction to Materiality

In this lesson, the concept of materiality is introduced and its significance in auditing financial statements is discussed. Materiality is defined as the amount of misstatement that would influence a reasonable financial statement reader's interpretation. The lesson highlights the application of materiality to all the financial statements individually and explains the challenges in determining materiality, as different firms have their own methods, and how materiality judgments should consider the needs and purposes of users as a group. The importance of considering the type and purpose of the audit when assessing materiality is also emphasized, touching on the numerous types of audits and their respective goals. Finally, the lesson clarifies that the auditor should aim to meet the needs of users as a group, rather than trying to cater to the specific needs of individual users.