Lesson: Materiality Overview
This lesson provides an overview of materiality, a crucial concept in auditing which helps determine the significance of an issue and whether it warrants further investigation. The lesson explores different factors that influence materiality, such as fraud involving management regardless of the monetary amount. Additionally, the lesson discusses how materiality applies to various financial statements and situations, such as misstatements of cash. Through an in-depth look at learning objectives, viewers will gain a solid understanding of materiality and its importance in the auditing process.
Updated: June 22, 2023 Create an accountThis lesson provides an overview of materiality, a crucial concept in auditing which helps determine the significance of an issue and whether it warrants further investigation. The lesson explores different factors that influence materiality, such as fraud involving management regardless of the monetary amount. Additionally, the lesson discusses how materiality applies to various financial statements and situations, such as misstatements of cash. Through an in-depth look at learning objectives, viewers will gain a solid understanding of materiality and its importance in the auditing process.
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Here we arrive at our good old friend materiality. Simply put, is something that we are investigating in an audit going to be important enough to justify further procedures? If there's $100 worth of fraud in a multi-billion dollar company, is that material? Is that significant? That's going to be what we're going to be discussing here. Now we're going to talk about different concepts where no matter what, something's material. If you've got fraud with senior management or any management in particular, no matter what, if that's $100 of fraud, that still will be significant. We'll talk about why. In general, if we've got a misstatement of cash, cash is off by $100. Dealing with a multi-billion dollar company, not going to be a big deal, not going to be much a usage of our time. That's the concept of materiality in a nutshell. We're going to go through the learning objectives and see what we are going to dive into further in this lesson.