Week 2 worksheet fin590

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FIN/590 r3

Week 2 Assignment Worksheet

Assignment: Understanding of What Materiality and Evidence are and Material Misstatement

Complete the table by filling in each box.

Research, analyze, compare, and contrast the topics listed in each column, including citations.

Directions

Operation Audit

Compliance Audit

Financial Statement

Audit

Describe materiality

and how auditors

assess and identify

materiality. Provide

examples form your

selected publicly

traded company.

Materiality in auditing

seeks to determine

whether omissions or

misstatements could

influence decision-

makers.

Auditors determine

materiality by

following accounting

principles and their

professional judgement

(SHVYREVA, &

PETUKH, 2018).

Example at

McDonalds include the

include setting

materiality thresholds.

Materiality is a

requirement of

various accounting

standards including

the GAAP and IFRS.

The IFRS defines

what material is as

omissions or

misstatements could

influence decision-

makers.

Example at

McDonalds include

the include setting

materiality

thresholds.

A misstatement or

omission is

considered material

if it could influence

or mislead the

stakeholders using

the financial

statement –

managers, investors,

and partners (Jacoby

& Levy, 2016).

Auditors determine

materiality by

following accounting

principles and their

professional

judgement.

Example at

McDonalds include

the include setting

materiality

thresholds.

Demonstrate how the

auditor assess the risk

of material

misstatement. Provide

examples form your

selected publicly

traded company.

There is no standard

rule or norm for

determining

materiality of

transactions. Thus, it

mostly depends on the

professional judgement

The amount and

nature of a

transaction must be

taken into

consideration when

determining the risk

of a material

Due to the

McDonald’s $20

billion revenue, a

misstatement of

$100,000 would be

deemed immaterial

since it is

Wk 2 Worksheet

FIN/590 r3

Page 3 of 3

Directions

Operation Audit

Compliance Audit

Financial Statement

Audit

of the auditor. At

McDonald’s the risk of

material misstatements

is based on the size of

the transaction. For

example, A $1 million

transaction presents a

greater risk than a $50

transaction

misstatement. A

misstatement that is

less than 1% of the

total revenue is

deemed immaterial

at McDonald’s.

However, if its due

to fraudulent

behavior, it can be

considered material

inconsequential to

the overall financial

performance. (It is

less than 1%)

Compare and contrast

materiality and

evidence auditors

assess, and identify

materiality in both.

Provide examples

form your selected

publicly traded

company.

Materiality auditors

assess quantity as well

as its effect has on

various activities of the

company. Evidence

auditors assess

accounting records and

other financial data.

An example of

auditing evidence is

include receipts, bank

accounts, bank

statements and

management accounts

of McDonald’s

company.

Under compliance

audit, materiality

auditors assess the

quantity and impact

of.

Evidence auditors

assess information

and determine

whether the company

adheres to external

laws, regulations,

rules or its internal

guidelines. Examples

is assessing the

compliance of

McDonald’s

employees in terms

of compliance to foot

safety rules and

regulations.

In this context,

materiality auditors

assess the quantity

and its impact on the

company’s financial

statement. Evidence

auditors collect

information and

determine the

accuracy and

compliance on

financial statements

of the company. An

examples are

financial data on

income statement

and cash flow

statements.

Demonstrate testing

methods and

sampling.

The testing methods

are based on setting a

materiality threshold or

benchmark and

comparing it with

misstatements to

determine whether

they are material or

not. The sampling is

based on the business

needs – some aspects

The testing methods

are based on setting a

materiality threshold

or benchmark and

comparing it with

misstatements to

determine whether

they are material or

not (Kudrenko &

Kotendzhi, 2020).

Sampling covers all

The testing methods

are based on setting

a materiality

threshold or

benchmark and

comparing it with

misstatements to

determine whether

they are material or

not. Sampling covers

all the significant

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FIN/590 r3 Week 2 Assignment Worksheet Assignment: Understanding of What Materiality and Evidence are and Material Misstatement Complete the table by filling in each box. Research, analyze, compare, and contrast the topics listed in each column, including citations. Compliance Audit Financial Statement Audit Describe materiality and how auditors assess and identify materiality. Provide examples form your selected publicly traded company. Materiality in auditing seeks to determine whether omissions or misstatements could influence decisionmakers. Auditors determine materiality by following accounting principles and their professional judgement (SHVYREVA, & PETUKH, 2018). Example at McDonalds include the include setting materiality thresholds. Materiality is a requirement of various accounting standards including the GAAP and IFRS. The IFRS defines what material is as omissions or mis ...
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