Aspects of Materiality: A Continuing Education Report Essay -- Account

Introduction The concept of materiality provides a topic for continuing educational discussion that many firms across the country find essential to the development of their audit staff. Measuring and using materiality to obtain desired results during an audit becomes the responsibility of the staff member of a CPA firm. Partners and managers of a firm typically allow the staff member to use his/her judgment when applying this concept during the fieldwork of an audit. The overall success of an audit relies at least in part on the materiality concept; therefore, staff members’ continuing education on the concept becomes important and necessary. This report will define the term materiality, determine how to measure materiality, and explain the importance of the concept to the field of auditing. Defining Materiality The utilization of the concept of materiality in auditing dates many years. Varying definitions of materiality during the preliminary stages of utilization prove that auditors recognized a need for this concept but did not have a standard for defining the term. The recognition by the Financial Accounting Standards Board (FASB) of the need for this concept prompted a decision to determine a universally recognized definition of materiality. In the book, Auditing Concepts for a Changing Environment, the FASB defines materiality as, â€Å"the magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement† (Rittenberg and Schwieger 2001, 92). In essence, the concept helps auditors determine the financial information that... ...ff must understand the definition of the concept, determine the process for measuring materiality, and have a concrete understand of the importance of the concept when auditing a company’s financial statements. Works Cited Rittenberg, Larry E., and Bradley J. Schwieger. Auditing Concepts for a Changing Environment, 3rd ed. Harcourt College Publishers, 2001. Sauer, Richard C., â€Å"The Erosion of the Materiality Standard in the Enforcement of the Federal Securities Laws.† Business Lawyer 62, no. 2 (February 2007): 317-357. Gordeeva, Mayya, â€Å"Materiality in Accounting.† Economics and Management 16, 2011: 41-47. Messier, William F., Jr., Nonna Martinov-Bennie and Aasmund Eilifsen. â€Å"A Review and Integration of Empirical Research on Materiality: Two Decades Later.† Auditing: A Journal of Practice and Theory 24, no. 2 (November 2005): 153-187.