Audit Manual Excerpt: Materiality Guidelines-- Planning Materiality and Tolerable Misstatement Planning Materiality This section provides general guidelines for determining planning materiality and tolerable misstatement for audits performed by Willis & Adams. The application of these guidelines requires professional judgment and the facts and circumstances of each individual engagement must be considered. Statement of Financial Accounting Concepts No. 2‚ “Qualitative Characteristics of Accounting
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breach‚ and lastly is to determine whether the losses were an equitably foreseeable consequence of the defendant’s actions. CONTENTS Negligent misstatement refers to a representation of fact that been carelessly made‚ which is relied on the plaintiff to their advantages (O’Riordan‚ 2007‚ p.1). In 1964‚ the tort of negligent misstatement has been established and it has gained more recognition in this decades. It covers opinions and reality statements made by negligence. However‚ the tort
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• Why is materiality allocated only to those accounts that are sampled? An auditor needs to consider planning the audit and evaluating financial statements with the generally accepted accounting principles regulations. If an entity is considered less material to financial users then it is considered to be a materiality entity. Under the materiality principle‚ certain accounting standards may be ignored if it does not conflict a readers understanding on a financial statement. The total asset of
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Introduction It is imperative to determine whether or not the relationship between Investment Bhd (the Company) and A Bank Bhd (the Bank) is bound as a contract. Forming a legally binding agreement‚ or a contract‚ requires four elements; an offer‚ the acceptance of that offer‚ the intention to be legally bound‚ as well as consideration. Referring to the case of Affin Credit (Malaysia) Sdn Bhd v Yap Yuen Fui‚ the lack of an offer and acceptance will cause an agreement to be declared void from the
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Discuss the attitude toward materiality and material culture of a religious tradition of your choice Material culture is an exceedingly prominent part of modern day society‚ and can be seen almost everywhere one goes. Material culture can be categorised in four ways: ‘artefacts‚ landscapes‚ architecture‚ and art’; our attachment to each category interacting and influencing the others. As we have developed as human beings‚ our dependence on objects has steadily increased‚ both physically and psychologically
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Introduction The concept of materiality is important in the context of auditing. Materiality is a function of the time‚ the situation‚ and the people involved. Below I will explain why certain accounts have to be audited 100 percent and why materiality is allocated only to those accounts that are sampled. I will also explain if there is any component of audit risk within the control of the auditor. Lastly‚ I will explain how the three risks that make up audit risk inter-relate. Simulation
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profitable as they expected‚ and turnover has declined even further since they took over the business. Are Charlie and/or Harley able to take any action against Max? This essay will discuss the requisite elements for establishing negligent misstatement and the issue of liability to third parties. This area of business law is supported by a number of cases‚ which have established
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In this simulation‚ our team did an audit process by selecting a base to calculate Planned Materiality. We allocated the Materiality to the relevant accounts and set a Tolerable Misstatement for each account. Then‚ we assessed Audit Risk‚ Inherent Risk‚ and Control risk to derive Detection Risk. As a result of these decisions‚ we derived Sample Size and Sampling Interval‚ and set an Expected Misstatement. We learned that certain accounts have to be audit 100 percent. Some of these accounts are
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Assessing Materiality and Risk Simulation Assessing Materiality and Risk Simulation Why do certain accounts have to be audited 100%? Because there is only four months to complete the audit the auditor cannot sample more than three accounts. Inventory‚ accounts payable‚ and property‚ plant‚ and equipment have numerous transactions so they would be very time consuming to audit 100%; therefore‚ the auditor should only sample these accounts. However‚ the auditor should audit accounts like cash‚
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Audit Risk and Materiality MULTIPLE CHOICE: 1. An auditor compares 2002 revenues and expenses with those of the prior year and investigates all changes exceeding 10%. By this procedure the auditor would be most likely to learn that a. An increase in property tax rates has not been recognized in the client ’s accrual. b. The 2002 provision for uncollectible accounts is inadequate‚ because of worsening economic conditions. c. Fourth quarter payroll taxes were
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