Materiality and Audit Risk in EvaluatingMateriality and Audit Risk in Evaluating Audit Evidence

Materiality and Audit Risk in Evaluating Audit Evidence

23 The auditor’s assessment of materiality and audit risk may be different at the time of initially planning the engagement from the time of evaluating the results of audit procedures. This could be because of a change in circumstances or because of a change in the auditor’s knowledge as a result of the audit. For example, if the audit is planned prior to period end, the auditor will anticipate the results of operations and the financial position. If the actual results of operations and the actual financial position are substantially different to the anticipated amounts, the assessment of materiality and audit risk might also change.

24 The auditor shall bring to the attention of management, misstatements identified during the audit, other than those that are clearly trivial, for correction prior to evaluating the effect of remaining uncorrected misstatements.

25 “Clearly trivial” is not another expression for immaterial. Matters that are “clearly trivial” will be of a wholly different (smaller) order of magnitude than materiality used in planning and performing the audit, and will be matters that are clearly inconsequential, whether taken individually or in aggregate and whether judged by any criteria of size, nature or circumstances. Further, whenever there is uncertainty about whether one or more items are “clearly trivial”, the auditor ordinarily presumes the item is not “clearly trivial”.

26 In deciding whether misstatements are “clearly trivial”, the auditor uses professional judgement in considering matters such as:

• quantitative and qualitative factors;
• risk factors;
• the cumulative effect of detected misstatements (actual and likely); and
• the likely aggregate of undetected misstatements.