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I am revising ISA 700 but i am having problem differentiating between when issue is material and when it is perversive.
Some one please help me out with some clear examples of issues.tnx
HI,
A matter is material if it affects the economic decision of users takes on the basis of financial statements. It’s difficult! right.Materiality is considered both in terms of AMOUNT and NATURE.
AMOUNT:
more than 5% of PBT
more than 1% of Sales value
more than 2% of Total AssetsNATURE:
Compliance with law or regulation. Where public interest is involved. A profit is converted into loss.A matter is pervasive when it affects the financial statements as a whole such as when the going concern assumption is not appropriate.
TIP:
In exam there is remote chance that you will face a matter which is pervasive therefore concentrate on material matters. Pervasive matters are possible but not much in practice and exams;)- Topics: 0
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A matter is material if it can affect users of financial statements in their decision making.It can be material in amount and nature,and if it affects just a portion of financial statements.
It can be pervasive if it can affect financial stetements as a whole ie changing what would be a profit into a loss or the going concern has not been appropriately reported.- Topics: 0
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A matter being material and or pervasive is a matter of the auditors judgement. Thats one of the reasons why you’re an auditor, to determine what is material and pervasive while issuing your audit report. What is material is defined by the study guide which gives the guidlines of 0.5-1% 1-2% and 5% but for the matter to be pervasive, thats where you come in. Look at the matter careful and consider whether the matter disturbs significantly any reported results. Thats all.
Hi,
Matter is pervasive when it pervades into the Financial Statements. If the matter is affecting many components of statement of financial position and classess of transactions in the statement of comprehensive income then it can be concluded that the matter is pervasive.The level of materiality is a guideline only. An auditor may select very lower amount as threshold considering the high audit risk attached.
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