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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Main Author: Mohd. Iskandar, Takiah
Format: Article
Language:English
Published: Faculty of Accountancy & Accounting Research Institute (ARI) 2003
Subjects:
Online Access:http://ir.uitm.edu.my/id/eprint/13683/
http://ir.uitm.edu.my/id/eprint/13683/1/AJ_TAKIAH%20MOHD.%20ISKANDAR%20MAR%2003.pdf
id uitm-13683
recordtype eprints
spelling uitm-136832016-07-21T07:45:20Z http://ir.uitm.edu.my/id/eprint/13683/ Materiality judgments on audit opinions / Takiah Mohd. Iskandar 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 http://ir.uitm.edu.my/id/eprint/13683/1/AJ_TAKIAH%20MOHD.%20ISKANDAR%20MAR%2003.pdf Mohd. Iskandar, Takiah (2003) Materiality judgments on audit opinions / Takiah Mohd. Iskandar. Malaysian Accounting Review, 2 (1). pp. 124-138. ISSN 1675-4077
repository_type Digital Repository
institution_category Local University
institution Universiti Teknologi MARA
building UiTM Institutional Repository
collection Online Access
language English
topic Accountants
Auditing. Auditors
spellingShingle Accountants
Auditing. Auditors
Mohd. Iskandar, Takiah
Materiality judgments on audit opinions / Takiah Mohd. Iskandar
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.
format Article
author Mohd. Iskandar, Takiah
author_facet Mohd. Iskandar, Takiah
author_sort Mohd. Iskandar, Takiah
title Materiality judgments on audit opinions / Takiah Mohd. Iskandar
title_short 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_sort materiality judgments on audit opinions / takiah mohd. iskandar
publisher Faculty of Accountancy & Accounting Research Institute (ARI)
publishDate 2003
url http://ir.uitm.edu.my/id/eprint/13683/
http://ir.uitm.edu.my/id/eprint/13683/1/AJ_TAKIAH%20MOHD.%20ISKANDAR%20MAR%2003.pdf
first_indexed 2023-09-18T22:50:10Z
last_indexed 2023-09-18T22:50:10Z
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