As stated in the previous chapter, materiality is an important consideration for an auditor to evaluate whether the financial statements reflect a true or fair view or not. AAS 13 on “Audit Materiality” requires that an auditor should consider materiality and its relationship with audit risk while conducting an audit. When planning the audit, the auditor considers what would make the financial information materially mis-stated. The auditor’s preliminary assessment of materiality related to specific account balances and classes of transactions, helps the auditor decide such questions as what items to examine and whether to use sampling and analytical procedures. This enables the auditor to select audit procedures that, in combination, can be expected to support the audit opinion at an acceptably low degree of audit risk. Students may note that the auditor’s assessment of materiality and audit risk may be different at the time of initially planning of the audit as against at the time of evaluating the results of audit procedures.

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