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risk and materity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › risk and materity

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by Ken Garrett.
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  • November 29, 2015 at 11:04 am #286099
    anjujoseph
    Member
    • Topics: 12
    • Replies: 5
    • ☆

    Please explain why its so??
    There is inverse relationship between risk and materiality.if audit risk is high thn the materiality level set by auditor will b lower.

    November 29, 2015 at 11:51 am #286117
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10594
    • ☆☆☆☆☆

    Setting the materiality level lower would mean that instead of verifying all purchases over, say $5,000, you verify all over $2,000.

    That means that you would examine more purchase transactions. The driver behind that decision should be that you perceive greater risk that some of these transactions are wrong, so you need to examine more in response to that risk.

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