B1.
Paragraph 17 of this standard states: The auditor should evaluate whether uncorrected misstatements are material, individually or in combination with other misstatements. In making this evaluation, the auditor should evaluate the misstatements in relation to the specific accounts and disclosures involved and to the financial statements as a whole, taking into account relevant quantitative and qualitative factors.1/
B2. Qualitative factors to consider in the auditor's evaluation of the materiality of uncorrected misstatements, if relevant, include the following:
What are the two risks that are combined to make up the risk of material misstatement?The risk of material misstatement on an assertion level is composed of an assessment of inherent risk and control risk – inherent risk being the auditor's statement regarding the client's susceptibility of an assertion to being materially misstated.
What makes up the risk of material misstatement?Risk of Material Misstatement at the Assertion Level
Inherent risk is the susceptibility of an assertion to misstatement because of error or fraud, before considering controls. Control risk is the risk of misstatement that will not be prevented or detected by a reporting entity's internal controls.
What are the 3 factors of audit risk?Audit risk is a combination of three components:. Control risk. Sometimes a company's internal controls are inadequate to prevent or detect material misstatements. ... . Inherent risk. This term refers to susceptibility to a material misstatement, regardless of whether the company has strong internal controls. ... . Detection risk.. What are the factors in determining materiality in accounting?Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. '
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