Materiality judgments on audit opinions / Takiah Mohd. Iskandar
Materiality is an important criterion needed for issuing an audit opinion. However, the guidance as how materiality should be judged is not clear. Research results show that "percentage effect of an item on net profit" is the most important variable in making materiality judgment. However...
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| Format: | Article |
| Language: | English |
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Faculty of Accountancy & Accounting Research Institute (ARI)
2003
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| Online Access: | https://ir.uitm.edu.my/id/eprint/13683/1/AJ_TAKIAH%20MOHD.%20ISKANDAR%20MAR%2003.pdf |
| _version_ | 1796899873165934592 |
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| author | Mohd. Iskandar, Takiah |
| author_facet | Mohd. Iskandar, Takiah |
| author_sort | Mohd. Iskandar, Takiah |
| collection | UITM |
| description | Materiality is an important criterion needed for issuing an audit opinion. However, the guidance as how materiality should be judged is not clear. Research results show that "percentage effect of an item on net profit" is the
most important variable in making materiality judgment. However, there is lack of consensus about what is the appropriate threshold. The objective of this paper is to study two important variables, industry type and industry
specialization, that may have contributed to the inconsistencies in materiality judgments. The study also attempts to determine the specific threshold used for issuing an audit qualification. Results of an experiment indicate that the threshold for "except for" and adverse opinions are about 9% and 31% respectively. The study finds that the interaction between industry type and industry specialization affects opinion thresholds significantly at p=.004. The study shows that specialists of a particular industry differ from specialists of another industry in their opinion materiality thresholds. Hence, a consideration
should be given for the inclusion of more specific guidance in the standards. In the absence of definite guidelines on the appropriate materiality thresholds, auditors have to apply their professional judgments as to the likely threshold that would be appropriate for the different types of audit opinion. |
| first_indexed | 2024-03-06T01:27:21Z |
| format | Article |
| id | oai:ir.uitm.edu.my:13683 |
| institution | Universiti Teknologi MARA |
| language | English |
| last_indexed | 2024-03-06T01:27:21Z |
| publishDate | 2003 |
| publisher | Faculty of Accountancy & Accounting Research Institute (ARI) |
| record_format | dspace |
| spelling | oai:ir.uitm.edu.my:136832016-07-21T07:45:20Z https://ir.uitm.edu.my/id/eprint/13683/ Materiality judgments on audit opinions / Takiah Mohd. Iskandar mar Mohd. Iskandar, Takiah Accountants Auditing. Auditors Materiality is an important criterion needed for issuing an audit opinion. However, the guidance as how materiality should be judged is not clear. Research results show that "percentage effect of an item on net profit" is the most important variable in making materiality judgment. However, there is lack of consensus about what is the appropriate threshold. The objective of this paper is to study two important variables, industry type and industry specialization, that may have contributed to the inconsistencies in materiality judgments. The study also attempts to determine the specific threshold used for issuing an audit qualification. Results of an experiment indicate that the threshold for "except for" and adverse opinions are about 9% and 31% respectively. The study finds that the interaction between industry type and industry specialization affects opinion thresholds significantly at p=.004. The study shows that specialists of a particular industry differ from specialists of another industry in their opinion materiality thresholds. Hence, a consideration should be given for the inclusion of more specific guidance in the standards. In the absence of definite guidelines on the appropriate materiality thresholds, auditors have to apply their professional judgments as to the likely threshold that would be appropriate for the different types of audit opinion. Faculty of Accountancy & Accounting Research Institute (ARI) 2003 Article PeerReviewed text en https://ir.uitm.edu.my/id/eprint/13683/1/AJ_TAKIAH%20MOHD.%20ISKANDAR%20MAR%2003.pdf Materiality judgments on audit opinions / Takiah Mohd. Iskandar. (2003) Malaysian Accounting Review <https://ir.uitm.edu.my/view/publication/Malaysian_Accounting_Review/>, 2 (1). pp. 124-138. ISSN 1675-4077 https://mar.uitm.edu.my/ |
| spellingShingle | Accountants Auditing. Auditors Mohd. Iskandar, Takiah Materiality judgments on audit opinions / Takiah Mohd. Iskandar |
| title | Materiality judgments on audit opinions / Takiah Mohd. Iskandar |
| title_full | Materiality judgments on audit opinions / Takiah Mohd. Iskandar |
| title_fullStr | Materiality judgments on audit opinions / Takiah Mohd. Iskandar |
| title_full_unstemmed | Materiality judgments on audit opinions / Takiah Mohd. Iskandar |
| title_short | Materiality judgments on audit opinions / Takiah Mohd. Iskandar |
| title_sort | materiality judgments on audit opinions takiah mohd iskandar |
| topic | Accountants Auditing. Auditors |
| url | https://ir.uitm.edu.my/id/eprint/13683/1/AJ_TAKIAH%20MOHD.%20ISKANDAR%20MAR%2003.pdf |
| work_keys_str_mv | AT mohdiskandartakiah materialityjudgmentsonauditopinionstakiahmohdiskandar |