I choose the topic for my auditing project of “Materiality and the process of
assessing the materiality in auditing of financial statement”
My report consists of 3 main parts:
Part 1: Theoretical framework for materiality in auditing of financial
statement
Part 2: Current practice of the process for assessing materiality in auditing
of financial statement in Vietnam
Part 3: Assessments and Recommendation
CHAPTER 1: Theoretical framework for materiality in auditing of financial
statement
1.1 General reasoning about materiality in the audit of financial statements
1.1.1 The concept of materiality in the audit of financial statements
1.1.2 Criteria for assessing materiality in financial statements audit
a. Materiality is expressed in terms of
the scale of
of the items
The scale of materiality is considered from two angles: absolute scale and relative size.
b. Materiality is reflected in the nature of the items and transactions
1.1.3 The role of materiality
a.
During the audit preparation phase
b.
During the implementation phase
c.
During the completion of the audit plan
1.1.4 Audit risk and the relationship with materiality in auditing of financial statement
a.
Definition of audit risk
AR = IR × CR × DR
b.
Audit risk assessment
Risks of material misstatement can arise from a variety of sources, including external factors, such as
conditions in the company's industry and environment, and company-specific factors, such as the nature
of the company, its activities, and internal control over financial reporting
c.The relationship between materiality and audit risk
When planning the audit, the auditor considers what would make the financial
statements materially misstated.
There is an inverse relationship between materiality and the level of audit risk, that
is, the higher the materiality level, the lower the audit risk and vice versa
1.2 The process for assessing materiality in auditing of financial statement
a.Establishing a preliminary judgment about materiality
b.Allocating the preliminary judgment about materiality to account
balances or classes of transactions
c.Estimating likely misstatements and comparing the totals to the
preliminary judgment about materiality
d.Estimate the misstatements in the Financial statement
e. Comparing the estimated misstatements with the initial estimation (or
adjusted) about the materiality
CHAPTER 2: Current practice of the process for assessing
materiality in auditing of financial statement in Vietnam
2.1.1. Establishing a preliminary judgment about materiality
 AASC
 Deloitte
The Feature of the materiality assessing process in Deloitte and AASC
2.1.2. Allocating the initial estimation of materiality for items
2.1.3. Estimating likely misstatements and comparing the totals to the preliminary
judgment about materiality
2.1.4. Estimate the errors in the Financial statement
2.1.5. Comparing the estimated errors with the initial estimation ( or adjusted ) about
the materiality