Materiality in Auditing Essay Example | Topics and Well Written Essays - 2000 words - 7

Materiality in Auditing - Essay Example Financial mistakes are not always unintentional instead there is a culture of making misstatements in accounting due many reasons including unexpected errors, mistakes or negligence level of misstatement and/or fraud cases. Pointing out and examining the level of misstatement and its impact on the whole financial performance is one of the major concerns of auditors. Rittenberg, Johnstone, and Grambling (2011) suggested that the point or level of misstatements or materiality in data possess high concerns of auditors’ judgments and experience. The term â€Å"materiality† refers to the acceptable level of misstatement according to the experience and judgments of the auditors that do not affect the decisions of financial statement readers (Financial Accounting Standard Board). It sounds vague that a highly sensitive document and its materiality issues are left only to the judgments and knowledge of the auditors. Unfortunately, it is widely practiced and kept secret by the auditors as stated by Mock, at el (2009). The gaps in the phenomena are vital and should be covered with identifiable measures. It is necessary to develop a level of understanding for establishing accurate measures to address the problem. For the purpose of getting deep insight of the matter of materiality in auditing, the piece of writing is crafted to define and discuss wider aspects of materiality. The importance of materiality is apparent in the making of financial statement. International Accounting Standard board’s conceptual framework for preparing financial statements defined materiality as the data become â€Å"material† if its alteration or omission affects the stakeholders’ decisions (Todea, Joldos, and Cioca, 2013). To elaborate materiality is the cut-off point of accepting material data to the level up to which it does not impact in decision-making via financial statement drivers. Although, IASB