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The following statements relate to the effect of materiality on audit work:
1. All matters identified as material must be subject to tests of details
2. Matters that are immaterial are not subject to audit proceduresWhich of these statements are true?
A.1 only
B.2 only
C.Both 1 and 2
D.Neither 1 nor 2I chose D, however, the correct answer was A and no explanation was given in the model answer. I thought material matters are not always subject to tests of details but are dependent on specific risks and circumstances for appropriate substantive procedures to be performed.
Can you please explain why?
Thank you,
Iniss.Welcome to my AA forum!
Generally, ISAs require that sufficient appropriate audit evidence must be obtained for all material balances/classes of transactions/disclosure. (And as I have just explained in a very recent post, this requires some substantive procedures https://opentuition.com/topic/test-of-controls-v-test-of-details.)
Regardless of the risk assessment, if a balance (say) is material, you cannot given reasonable assurance that it does not contain material misstatement unless you test it.
Please ask for further clarification if that doesn’t make sense.
Thanks for your response,
I mean material misstatements can be tested using other substantive procedures such as analytical procedures instead of tests of details. But here, statement 1 was that they must be subject to tests of details.
Could you please clarify this?
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