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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.

The AAS is effective for all audits relating to accounting periods commencing on or after April 1, 1996.


Issued in January, 1997.
Published in the Handbook of Auditing Pronouncements, Vol. I, (Edn. 2003).
Also available as a separate publication of the Institute (Price: Rs. 15/-).
ISBN: 81-87072-02-4

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