materiality
Materiality is the threshold of significance used in accounting and auditing; an item is material if omitting or misstating it could influence the decisions of users of financial statements.
OpenFinancial Dictionary
Accounting & Finance Terms (English)
Accounting and Finance Terms Explained
Explore accounting, finance, auditing, taxation, and economics terms explained in clear English. Each entry provides a definition, a detailed explanation, practical uses, and examples where available.
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Materiality
Materiality guides audit planning and evaluation of misstatements; both quantitative and qualitative factors are considered.
OpenPCAOB
PCAOB is the regulatory body responsible for overseeing audits of public companies to protect investors and enhance audit quality.
OpenPerformance materiality
Performance materiality is a lower materiality threshold set by the auditor to reduce the probability that aggregate uncorrected misstatements exceed overall materiality.
Openpost balance sheet events
Post balance sheet events are significant events occurring after the reporting date that may require adjustment or disclosure in the financial statements.
OpenProfessional skepticism
Professional skepticism is an auditor’s critical mindset that involves questioning evidence and remaining alert to conditions that may indicate misstatement.
OpenQualified opinion
A qualified opinion is issued when misstatements are material but not pervasive.
OpenReasonable assurance
Reasonable assurance is a high level of confidence obtained by the auditor that financial statements are free from material misstatement, though not absolute certainty.
OpenRelated parties
Related parties are individuals or entities with a relationship that can influence transactions or decisions, requiring disclosure under applicable standards.
OpenRemote Auditing
Remote Auditing is performing audit work without being physically onsite by using secure technology for evidence collection, interviews, walkthroughs, and document review, while ensuring data security...
OpenReportable Condition
A reportable condition is a significant deficiency in internal control identified by the auditor that should be communicated to those charged with governance.
OpenRisk of material misstatement
Risk of material misstatement is the risk that financial statements contain material errors, arising from inherent risk and control risk combined.
OpenSampling
Sampling helps auditors obtain evidence efficiently, but it involves sampling risk; appropriate sample design and selection are important.
OpenSampling risk
Sampling risk is the risk that conclusions drawn from an audit sample differ from conclusions if the entire population were tested.
OpenSignificant risks
Significant risks are risks that require special audit consideration due to their nature, complexity, or likelihood of material misstatement.
OpenStrategic Systems Audit
Strategic Systems Audit focuses on the auditing procedures that test the assertions at entity-level based on the holistic understanding of the client business environment and business dynamics.
OpenSubsequent Events
Material event that occurs after the end of the accounting period and before the publication of a Financial Statements of entity. Such events are disclosed in the notes to the financial statements. Al...
OpenSubsequent events
Subsequent events are events occurring after the reporting period that may require adjustment or disclosure in the financial statements.
OpenSubstantive procedures
Substantive procedures are audit tests designed to detect material misstatements at the assertion level.
OpenSupporting documents
Supporting documents are documents that support an opinion or evidence for a point, such as documents supporting the audit process and providing technical evidence.
OpenTestimony
Testimony is evidence given by a competent witness under oath.
OpenVariance analysis
Variance analysis examines differences between actual results and budgeted/standard results to identify reasons and take corrective actions.
OpenWalkthrough test
A procedure where the auditor follows a transaction from initiation to recording.
OpenWitness
A witness is an individual who testifies at a trial about what they saw, heard, or otherwise observed.
OpenWork Sheet
A work sheet is a schedule/document where an accountant or auditor gathers information to support an opinion about an account balance or transaction testing.
OpenYellow Book
Written by the general accounting office, the yellow book sets forth standards to be followed in auditing the financial statements of entities that receive federal financial assistance. "Yellow Book" ...
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