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Kim Smith.
Kim Smith.-
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Noah098
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ma’am do we need to show in brackets or in separate table etc the materiality calculations method like: X/Y x100 ?
or we can straightaway write the direct answer?
Kim Smith
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I think that is just my advice how you can clearly earn the credit – it is just a convention for answers generally (not just AAA) too show where a % comes from. Since this is not an exam where “all workings must be shown” you would get credit for a % of a specified benchmark being correct without the working.
Noah098
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ma’am I wanted to confirm one more thing: while making materiality calculations for an item we need to make a judgment call right, whether to calculate it with respect to profit or assets?
And what if in panic we are not able to decide whether to calculate it with respect to assets or profits, and so decide to go ahead and calculate it with respect to both? so long as the calculations are correct will we get 1 mark for it?
Kim Smith
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But BOTH may well me relevant e.g. if there is a risk that impairment may not be recognised the other side of the debit P/L is credit PPE. THIS is not a matter of judgment. The judgment is if, for example, if % PBT is > 5% but less than 1% total assets.
But to reassure you – all relevant materiality calculations will be credited subject to the “cap” on marks – and there is not negative marking – so marks won’t be deducted for unsuitable calculations (they just won’t be credited!)
Noah098
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In completion and review questions,
when there is immaterial misstatement then, do we say that “there is a risk that X and Y are understated due to immaterial misstatement”
Or we DO NOT use the word RISK at all, and simply say that “due to immaterial misstatement X and Y are understated”
Sorry for bothering you with such silly doubts ma’am
Kim Smith
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Before you audit there is the possibility “risk” of misstatement – by the time the auditor has obtained sufficient audit evidence, he should know whether or not there is material misstatement. I don’t know why you are writing about immaterial misstatements – if you meant material, then do take care in the exam to write what you mean.
Noah098
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