Question

Materiality is essential when an auditor considers his/her determination of the appropriate report for a given set of circumstances?

1) True
2) False

Answer 1

Materiality is essential when an auditor considers their determination of the appropriate report for a given set of circumstances. They will modify the report if they deem certain factors to be significant or material in the financial statements and leave it unmodified if the factors are deemed insignificant or immaterial.

Step-by-step explanation:

Materiality is indeed essential when an auditor considers determining the appropriate report for a given set of circumstances.

1. If an auditor deems certain factors to be significant or material in the financial statements, they would likely change the report to emphasize those issues. For example, if there is a significant error or fraud that affects the financial statements, the auditor will consider it material and modify the report to indicate that the financial statements are not reliable.
2. On the other hand, if the auditor finds the factors to be immaterial or less significant, they are then classified as insignificant, and no modifications are required in the report. For instance, if a minor error that has no significant impact on the financial statements is identified, the auditor will deem it immaterial and provide a standard report with an unqualified opinion.