The title to be used when submitting this assignment is Materiality in Essay

The title to be used when submitting this assignment is Materiality in Auditing - Essay Example Therefore, an auditor has to set a materiality level for important and vital aspects of the audit in order to concentrate and focus on the areas that are important and necessary. The Financial Accounting Standards Board (FASB) defines materiality as â€Å"the magnitude of an omission or misstatement of an accounting information that, in the light of the surrounding circumstances, makes it probable that the judgement of a reasonable person relying on the information will have been changed or influenced by the omission or misstatement† (Johnstone, et al., 2013 p268) This implies that materiality is about the important issues and matters which when overlooked, will cause the financial statement to be overly misleading. Therefore, in the auditing context, materiality involves a situation whereby the auditor examines and reviews important things in his analysis of the financial statements in order to ensure that the opinion they pass on the financial statement are valid and reliable. Materiality affects sample sizes and determines whether the financial statement needs adjustments or not, and it represents the difference between a qualified and an unqualified report (Bagshaw & Selwood, 2013). This shows how the auditor can estimate the levels of issues that matter and then define the way and manner in which work can be distributed and conducted throughout the entire audit. This therefore means that materiality informs an auditor of which aspects of the financial statement amounts are to be given certain levels of attention. This gives the auditor guidelines on how to evaluate and analyse things and the extent to which focus should be given to certain components of the financial statement. Materiality is to be defined on a case-by-case basis. It involves the integration of professional judgement. It is done by examining the entire financial statement as a whole and this will help the