WHAT IS MATERIALITY?

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According to the auditing standard, “Materiality means the amount or amounts set by the auditor at less than materiality for the financial statements as a whole to reduce, to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole” (Canadian Institue of Chartered Accountants 2012a). We might also consider out textbooks definition “The magnitude of an omission or misstatement, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatements (Arens, et al 2012). As we can see the definition of materiality can vary based on the source. In our own words we view materiality as whether or not omitted or missing information would affect a decision made by someone who was relying on the information.
MATERIALITY, IN HISTORY
Over the years materiality has changed and evolved in various ways to reach the point where it is today. We will now take a look at some of the major changes in materiality over the past century. With respect to events prior to 1950, it is important to know that Generally Accepted Auditing Standards (GAAS) were publicized in October 1947; however, they were not yet elabo¬rated upon (Selley 2010). This means that while the standards were created they were not well researched or very specific at this point. Next we will talk about one of the largest changes in the history of auditing with respect to materiality. Starting in the U.K. in 1900 the use of the phrase “true and correct” was changed to “true and fair” (Selley 2010). This was a big turning point for auditing because not on...

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...s an Auditing Concept." University of Mississippi Libraries Digital Collections: Accounting Collections. http://clio.lib.olemiss.edu/cdm/ref/collection/deloitte/id/25065 (accessed 02 22, 2014).
Udrea, Ana, Todea Nicolae, Stancia C. Lonela, Demian E. Gabrieala, Pintilie Corneliu, and Alina Ciuhureanu. 2010. "The Importance of Determining Materiality in Statutory Auditing." International DAAAM 21, no. 1: 905-06.
Vorhies, James B. 2013 "The New Importance of Materiality CPAs can use this Familiar Concept to Identify Key Control Execptions." Journal of Accountancy. http://www.journalofaccountancy.com/Issues/2005/May/TheNewImportanceOfMateriality.htm. (accessed 02 21, 2014).
Wright, Tiffany C. 2014 "What is a "Materially Adverse" Impact in Accounting." Azcentral.com. http://yourbusiness.azcentral.com/materially-adverse-impact-accounting-17471.html (accessed 02 21, 2014).

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