- This topic has 5 replies, 2 voices, and was last updated 8 years ago by
.
- Posts
hello mike,
i was reading ISA510 opening balancesi read that : in all cases where there is a new auditor (prior period balances audited by a predessor auditor),the audit report must contain an Other MATTER PARAGRAPH immediately below the opinion paragraph.this applies whether or not the audit opinion being expressed is modified .
so regarding above i want to be sure that in the audit report ,is that paragraph going to be included before basis of opinion ,as basis of opinion always is after opinion immediately .please confirm
i also have another thing to ask that what is performance materiality and how it is different from materiality levels ,and why it is set below the materiality level
I’m not 100% but I imagine that after the basis of opinion paragraph would be the place
Performance materiality is a lower level than ‘ordinary’ materiality in order to focus the auditor’s attention more specifically in identified risk areas
This is a post from Ken F8 tutor from 5 years ago:
‘Well, let’s say you had determined that 10,000 was the materiality level for assets. If a receivable balance were wrong by more than that then the possibility of a material misstatement has to be considered, and the error has to be noted by the audit team for consideration by the partner.
However, what if receivables were overstated by 8,000 and non-current assets overstated by 8,000 and liabilities understated by 8,000? These errors add up to $24,000 ALL IN THE SAME DIRECTION. Therefore, materiality is set at a lower level just in case such a scenario occurs.’
OK?
re,,to the above example of receivables materiality levels ,,if materiality is set at 10000 ,why and how we come to know that receivables may be overstated by 8000 as we would be only looking at balances that are 10000 above ….
And that’s exactly why we have a lower level for performance materiality
If we reduce performance materiality down to, say, $7,000 then we find all these smaller errors which, in aggregate, will exceed our financial statement materiality levels
- You must be logged in to reply to this topic.