Reference no: EM133233622
AU-C Section 200, paragraph 7 requires that an auditor consider both quantitative and qualitative aspects of a misstatement to determine if the misstatement is material. Which of the following would be considered a QUALITATIVE aspect to a misstatement that WOULD MAKE THE MISSTATEMENT MATERIAL?
The misstatement exists because the inventory manager made a mathematical error on a receiving document.
The misstatement is a significant dollar amount.
The misstatement exists because of fraud committed by the CEO and other executive leaders of the organization.
The misstatement exists because the accounts receivable clerk erroneously transposed numbers on an invoice
AU-C Section 200, paragraph 7:
The concept of materiality is applied by the auditor when both planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and uncorrected misstatements, if any, on the financial statements. In general, misstatements, including omissions, are considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. Judgments about materiality are made in light of surrounding circumstances, and involve both qualitative and quantitative considerations. These judgments are affected by the auditor's perception of the financial information needs of users of the financial statements, and by the size or nature of a misstatement, or both. The auditor's opinion addresses the financial statements as a whole. Therefore, the auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by fraud or error, that are not material to the financial statements as a whole, are detected. (Ref: par. .A14) [As amended, effective for
audits of financial statements for periods ending on or after December 15, 2021,by SAS No. 138.)
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