When a client fails to follow GAAP, the audit report can be unqualified, qualified, or adverse depending on the materiality.What factors affect materiality that an auditor should consider?
A)The dollar amount in comparison to a base
B)If the misstatement can be measured
C)The nature of the item
D)All the above are factors an auditor should consider regarding materiality.

Question

Quizplus · Accepted Answer

All the factors mentioned in A, B, and C affect materiality and should be considered by the auditor. Materiality is the amount of misstatement that can influence the decisions of the users of the financial statements, and it depends on the significance, nature, and circumstances of the misstatement. The dollar amount in comparison to a base (like revenues, net income, or total assets), the measurability of the misstatement, and the nature of the item (like revenue, expense, asset, liability, or equity) are relevant factors that the auditor should assess to determine materiality.

When a Client Fails to Follow GAAP, the Audit Report