Quantitative Materiality Factors in Auditing

DOI: 10.5176/2251-1997_AF-49

Authors: Julia Severus

Abstract:

At present, ways to improve audit quality andauditing decisions are intensively being discussed worldwide bystandard setters and researchers. Audit quality is mainlyinfluenced by two factors the requirements of standard settersand the professional judgment of auditors. Especially themateriality judgment is mainly affected by the individual judgment of the respective auditor, because there is a lack of clear standardized guidelines for materiality judgments. Thus the same issue could be judged differently by different auditors. Auditors’ materiality judgments are important because they have a significant influence on what information is recorded in the accounts and disclosed in financial statements and hence available for decision making by external parties. The objective of the research is to study the effects of standardized materiality guidelines on auditors’ materiality judgment. By the use of an experimental study the paper examines if the setting of quantitative materiality thresholds lead to a more objective auditors’ materiality judgment and to a more uniform materiality judgment for same issues. The results of the study provide evidence that the use of standardized materiality guidelines leads to a more uniform materiality judgment. The paper discusses the implications of these findings.

Keywords: auditing; audit materiality; audit practice;experimental study, International Standards on Auditing;