英语论文网

is to use a percentage of a key figure in the financial report such as one of the following:
• Profit or loss before tax (adjusted, if appropriate, for the effect of any abnormal levels of items of expenditure such as the owner-manager’s remuneration).
• Revenue.
• Balance sheet total.
.49 Often in the case of small entities, a draft financial report is not available to the auditor at the commencement of the audit. When this is the case, the auditor uses the best information available at the time. The current year’s trial balance may be used, if available. Often an estimate of revenue for the current period can be more readily obtained than of profit (or loss) or of a balance sheet total. A common approach in the preliminary judgement of materiality is to calculate materiality on the previous year’s audited financial report as amended for known circumstances in relation to the year subject to audit.
.50 Assessing materiality as a percentage of pre-tax results may be inappropriate when the entity is at or near the break-even point as it may give an inappropriately low level of materiality, leading to unnecessarily extensive audit procedures. In such cases, the auditor may apply the percentage method, for example, to revenue or balance sheet totals. Alternatively, materiality may be assessed having regard to assessed levels of materiality in prior years and the normal level of results. In addition to considering materiality at the overall financial report level, the auditor considers materiality in relation to individual account balances, classes of transactions, and disclosures.
Assessment of Materiality When Evaluating the Results of Audit Procedures
.51 Whatever basis may be used to assess materiality for audit planning purposes, the auditor reassesses materiality when evaluating the results of audit procedures. This reassessment takes account of the final version of the draft financial report, incorporating all agreed adjustments and information obtained during the course of the audit.
.52 Although materiality at the reporting stage is considered in quantitative terms, there is no clear threshold value but rather a range of values within which the auditor exercises judgement. Amounts above the upper limit of the range may be presumed material and amounts below the lower limit may be presumed not material, although either presumption may be rebutted by applying qualitative considerations.
.53 In addition, although planning may have been based on a quantitative assessment of materiality, the auditor’s opinion will take into account not only the amount but also the qualitative nature of individual misstatements and the aggregate of unadjusted misstatements within the financial report.
Inherent Risk
.54 In the audit of a small entity, control risk is often assumed or assessed as high, at least for certain financial report assertions. The assessment of inherent risk for those assertions takes on a particular significance, as it has a direct impact on the extent of substantive procedures. There are difficulties in the assessment of the inherent risk of a small entity, for example there may be increased risk as a result of the concentration of ownership and control. However, the auditor’s assessment of inherent risk in a small entity depends on its particular characteristics. A careful assessment of inherent risk for material financial report assertions, rather than an assumption that it is