AUDIT CHAPTER 9~

3 papers before stairways to heaven..hehehe..cant wait for the 'merdeka' day..but nevertheless within my busy exam schedule still i'm going to post yet another entry ablut audit,chapter 9:audit materiality..this post dedicated to cik reena,sorry cant make it to further explain to u bout this chapter..here goes the entry..

basically this chapter touch on 5 major parts that u need to know and understand in details..first is about defining the meaning of materiality..we can define materiality as magnitude of accounting infotmation, in the judegement of the person relying on it,the information might be misstatement or not..The information or the statement is consider material if the omission or misstatement will result in the negative impact in decission making...

second part,about steps needed in applying materiality..there are 5 steps that u need to know in applying materiality..the FIRST ONE being to set preliminary judgement about the materiality..this step need to be done before starting the audit process..auditors need to decide the combining amount of tolerable misstatement or level of materiality that they might consider..the judgement will vary over time so auditor must document their judgement..SECOND STEP is to allocate the amount to segments..auditors must allocate the judgement they make earlier to each segments they think necessary..the amount can not be used as a whole as it might get complex in later stage..difficuties arise in segmenting are because of level of materiality in each segments vary,auditor need to consider the overstatement and understatement of each accounts, and also the relative cost of audit affect the allocation..THE THIRD,FOURTH AND LAST STEPS is to accumulate and compare with the preliminary judgement..this last step is done after the audit process..

third part about this chapter is the qualitative factors in determining meteriality..the factors are AMOUNT INVOLVING FRAUD,IMMATERIAL BUT WITH CONTRACTUAL OBLIGATION AND THE LAST ONE BEING IMMATERIAL BUT MAY EFFECT TREND IN EARNINGS..no further elaborations about this one..sorry...

the fourth part is about the base needed for evaluating materiality..there are NET SALES,GROSS PROFIT AND TOTAL ASSETS..again no further elaboration..

the last part being risk types..there are 4 type of risks that mention in this chapter..the first one is PLANNED DETECTION RISK..this risk is about the percentage of audit evidence will fail to detect the misstatement..low planned detection risk means that more accumulated evidence is needed by auditor..next one is INHERENT RISK..this risk is about making assumtion that there are misstatement eventhough before testing the effectiveness of the internal control..high inherent risk means that the statement is likely to be misstatement..the third risk in CONTROL RISK..this risk have unique relationship with inherent risk..control risk is about the effectiveness of the internal control..if the Internal control is effective then it means low control risk,low inherent risk,high planned detection risk and less audit accumuated audit evidence is needed..the last risk is ACCEPTED AUDIT RISK @ AUDIT ASSURANCE..risk that auditor going to accept the financial statement is misstated..

wallaaaa..done for this chapter...im sorry,i cant post summary for another two chapters..vino,sorry u need to read it..all the best guys for tomorrow's paper...be a person with integrity and independe,,dont commit fraud tomorrow..hehehe...

-theskyisnevertoohightoaim-