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We learn that:
The overall audit stategy & plan should take into consideration the element of materiality and its relationship with risks & procedures to be adopted.High materiality = Detailed Procedures = High Risks
Low materiality = Test checks = Low Risks[Page 10/54 in https://resource.cdn.icai.org/67341bos54163-cp2.pdf (CA Study Material)]
What does it mean by “high” and “low” materiality?
If it is talking about materiality numbers being high, does it mean it is associated with higher risks and that it should be coupled with detailed procedures? Then what was the point to make the materilaity higher in the first place?
Or is it talking about a risk being MORE & LESS material?
Hmmm – I see why that would confuse you. Generally we talk about an “inverse” relationship between risk and materiality – the higher the risk – the lower materiality (in monetary terms).
Please look at page 57 of our AA notes https://opentuition.com/acca/aa – if RoMM is high, detection risk must be reduced to a sufficiently low level in order to have audit risk at an acceptably low level. One way of reducing detection risk is to do more work – this would mean larger sample sizes – which corresponds to monetary materiality being set at a lower level.
You’re very welcome! For technical questions feel free to post to my tutor forum https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-audit-and-assurance-aa-exams rather than this student forum.
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