Which of the following is correct in relation to materiality?
Correct answer: D. A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditors' report
- A. A matter is material only if it changes the audit report
- B. A matter is material if the auditor and the directors both decide that further work needs to be done in the area under question
- C. A matter is material only if it affects directors' emoluments
- D. A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditors' report
Explanation
A matter is material when omitting or misstating it could reasonably affect the economic decisions of users of the audit report. Materiality is therefore judged by its potential effect on users, not merely by whether it changes the report or concerns directors’ pay.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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