MATERIALITY CONCEPTS

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MATERIALITY CONCEPTS FOR AUDITING INFORMATION
SYSTEMS
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PRESENTED TO SIR SAAD
PRESENTED BY SANA FAROOQ
MITF06A023
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MATERIALITY

• DEF
• Misstatement that could change or influence the
  decision of a person relying on the FS and has a
  reasonable knowledge of the organization.
• The principle under which insignificant,
  inconsequential, and unimportant data and
  information are excluded from financial reports

• The importance of an event or information in
  influencing a company's stock price.

• Information is material if its omission or
  misstatement could influence the economic
  decisions of users taken on the basis of the
  financial statements. Materiality depends on the
  size of the item or error judged in the
  particular circumstances of its omission or
  misstatement.

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Concept of Materiality

• One of the major concept of Auditing.
• The concept of materiality states that
• Fair presentation of Financial Information
• no Material misstatement.
• The IS auditor should consider both qualitative
  and quantitative aspects in determining
  materiality
• Considered by auditors before making opinion on
  financial statements

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Assessment of Materiality

• No Hard n Fast rule
• It may be material in one circumstance and
  may not be in other
• What is material is a matter of
• - Professional Judgments
• - Experience of auditors

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PLANNING Materiality

• In the planning process,
• The IS auditor establish levels of planning
  materiality
• To meet the audit objectives and will use audit
  resources efficiently.
• For example, in the review of an existing system
  
• the IS auditor will evaluate materiality of the
  various components of the system in planning the
  audit programme for the work to be performed.

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Application For Materiality

• There is no general rule of application for
  materiality.Materiality depends on two
  circumstances.
• Quantitative Materiality
• determines quantitative range between total
  expenses, depending on the size.
• This threshold is applied to aggregate of all
  errors and misstatements.
• Items below the threshold are probably not
  material.
• Qualitative Materiality
• The qualitative aspect recognizes that
  materiality cannot be determined solely by means
  of the application of a numeric threshold.
• consideration of influence in decision-making.

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Conclusion
The consideration of the
materiality of an item is the matter of
professional judgement and experience of the
auditor. The financial statements must contain
all the material information to show true and
fair picture. Objective and Scope of the Audit
of Financial Statements, states that the
auditors opinion helps determination of the true
and fair view of the financial position and
operating results of an enterprise. The user,
however, should not assume that the auditors
opinion is an assurance as to the future
viability of the enterprise or the efficiency or
effectiveness with which management has conducted
the affairs of the enterprise.
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