Information is material if its misstatement (i.e., omission or erroneous statement) could influence the economic decisions of users taken on the basis of the financial information. Materiality provides a cut off point rather than being a primary qualitative characteristics which the information must have if it is to be useful. This AAS establishes standards on the concept of materiality and its relationship with audit risk. Accordingly, the AAS deals with aspects such as establishment of acceptable materiality levels, relationship between materiality and audit risk, procedures to reduce audit risk, materiality and audit risk in evaluating audit evidence, components of aggregate of uncorrected misstatements and auditor’s plan of action, review of materiality level and subsequent changes therein, etc. |
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Issued in January, 1997. |