Study on the Calculation of Materiality in the Financial Audit Activity
Author:
Univ. Prof. PhD Nicolae TODEA, PhD Student Ionela STANCIU
JEL:
DOI:
Keywords:
materiality, audit, audit risk, financial audit
Abstract:
The financial audit represents a subject within the sphere of accounting which involves, besides the accounting knowledge, the following: legal information, knowledge concerning the economic and financial analysis, mathematics, informatics and ethics. The explanation of the pluridisciplinarity of the financial audit is the following: the financial auditors must verify the compliance of the financial statements with reality, on one hand, and the observance of the principles, rules and criteria established for the registration and presentation of the accounting information, on the other. Financial audit represents „the activity of examination, in order for the financial auditors to express an opinion on the financial statements, in accordance with the auditing standards” (according to art. 2 of the Government Emergency Ordinance no.75/1999 republished, on the financial audit activity). The objective of an audit is to give the auditor the possibility to express an opinion concerning the preparation of the corresponding financial statements, in all their material aspects, in accordance with an identified financial reporting framework (International Standard on Auditing 200, 2 paragraph). In terms of financial audit, „the materiality” is defined as being that level of „information without which, by their omission or erroneous statement, the users’ economic decisions could be affected, decisions taken based on the financial statements”. Thus, the materiality provides rather a limit than a primary qualitative feature that the information has to contain in order for it to be useful. \r\nWhen an audit is being performed, the auditor must take into consideration the materiality and its relation with the audit risk. The auditor reviews the audit risk and materiality concepts because, according to them, the auditor plans the financial audit. Once established the levels of materiality and audit risk, they determine the type and extent of tests applicable to the audit samples. The auditor takes into consideration the materiality both at the global level of financial statements, as well as in relation to the account balances, transaction classes and disclosures. The materiality could be influenced by legal and regulatory requirements, as well as by considerations related to the transaction classes, account balances, disclosures and by the existing relations between them.