Passing over the materiality level in conducting an audit

Author:University professor, PhD. Victor MUNTEANU

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Keywords:planning, evidences, risk, preliminary assessments

Abstract:
Auditors can not guarantee to their clients of other users of the financial statements that these are true, correct and fair without reviewing them. To guarantee them means that the auditors review each transaction for the period and concluded that all the accounting records were correctly stated, reflected, classified and recorded in the financial statements. This would be impossible to do.\r\n\r\nIt is well known that the auditors can not review each transaction reflected in the financial statements, they being willing to accept a reduced number of errors. How many errors or omissions is an auditor willing to accept in the financial statements in order to present a correct opinion on them? This question is extremely difficult and its answer resides in a concept called materiality, defined as follows: „the size of an item or error judged in the particular circumstances which affects or influence the judgment of an individual”.\r\n\r\nThere are two ways for an auditor to use the materiality. The first one is to use it in planning the audit, and the second one is when assessing the evidence while performing an audit. As far as concerns the planning, auditors must use preliminary estimations for materiality because there is an indirect relation between the amounts in the financial statements the auditors considers as being significant and the necessary time work in order to prove the accuracy of the financial statements.\r\n\r\nThe considerations of the materiality are inherent in the audit process because they help to determine the time necessary for collecting the evidences and to make a decision if the financial statements are accepted as being accurate. Auditors must use significance in order to guarantee the accuracy of the financial statements.\r\n\r\nOpinion on accuracy expressed by the auditor’s starts from the assumption that the materiality level has been used.\r\n

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