ppt auditing

presented byCut RusminaCindi Paramita FebruariKoko BustamiMATERIALITY AND AUDIT RISK

1. Definition of Materiality4. Audit Risk

3. Relationship between materiality and audit evidence 2. Preliminary considerations on materiality AGENDA

1. Definition of MaterialityFinancial Accounting Standards Board defines materiality (materiality) as: "The amount of a waiver or misstatement of accounting information that, outside of his surroundings, allowing that the consideration of a person who relies on the information would be changed or affected by the neglect or misstatements.

2. Preliminary considerations on materiality In planning an audit, the auditor should assess materiality at the following two levels:1. The level of the financial statements, because the auditor's opinion on the fairness extends to the financial statements as a whole.

2. The level of account balances, since auditors test the account balance to obtain the overall conclusion on the fairness of the financial statements

The factors to be considered in making a preliminary judgment about materiality at each level are as follows: AMateriality of the financial statements is a minimum aggregate misstatement in a financial statement that is quite important to prevent statements are presented fairly in accordance with accounting principles generally accepted.

Materiality in Financial Statements LevelThe factors to be considered in making a preliminary judgment about materiality at each level are as follows: BAccount balance materiality is "a minimum misstatements that may occur in an account balance is considered to contain a material misstatement. Misstatement to the level known as the tolerable misstatement.Materiality at the level of Account Balance The factors to be considered in making a preliminary judgment about materiality at each level are as follows: CWhen the auditor's preliminary judgment about materiality of the financial statements to be quantified, a preliminary assessment of the materiality of each account can be obtained by allocating materiality to the financial statements on individual accounts. The allocation can be done either on the balance sheet accounts and the accounts of the income statement.Allocating Materiality in Financial Statements of accounts Materiality is one among the various factors that affect the auditor's judgment about the adequacy (quantity) of audit evidence.3. Relationship between materiality and audit evidence 4. AUDIT RISK

"The risk of an audit (audit risk) is the risk that the auditor may have inadvertently failed to appropriately modify the opinion on financial statements contain material misstatements (Boynton, 2003)".

The overall concept of the audit risk is the opposite of the concept of reasonable assurance. The higher certainty to be obtained in the auditor's opinion correctly states, the lower the audit risk he would receive.5. Risk level of financial statement audit and account balance rate

Audit risk, such as materiality is divided into two parts: 1. The overall audit risk associated with the financial statements as a whole.

2. Individual audit risk associated with each individual account balances are included in the financial statements.

Inherent risk6. Elements / components of audit risk

Statement on Auditing Standards (AU 312.27) defines the default risk is as follows: "the susceptibility of an assertion to the possibility that a material misstatement, assuming there are no related internal controls.

1.Control Risk6. Elements / components of audit risk

Statement on Auditing Standards (AU 312.27) defines the default risk is as follows: "the susceptibility of an assertion to the possibility that a material misstatement, assuming there are no related internal controls.

2.Detection Risk6. Elements / components of audit risk

Statement on Auditing Standards (AU 312.27) define the risk of detection as follows: "Audit risk (detection risk) is the risk that the auditor will not detect a material misstatement that exists in an assertion (Boynton, 2003)".

3.7. Relationships between components of risk Risk detection has an inverse relationship with the risk inherent and control. The smaller the inherent risk and control risk are believed by the auditor, the greater the risk of detection is acceptable. Conversely, the greater the risk inherent and control risk is believed by the auditor, the smaller the degree of detection risk is acceptable.

8. Relationship between materiality, audit risk and audit evidence

Various possibilities for the relationship between materiality, audit evidence, and audit risk is described as follows:Increase the level of materiality, while maintaining the amount of audit evidence collected.

Increase the amount of audit evidence collected, while the materiality levels were maintained.Adding a little amount of audit evidence and the level of materiality dikumpukan together.132