THE ROLE OF AUDITORS, MANAGERS AND THE AUDIT COMMITTEE IN MATERIALITY

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Managers, auditors and audit committees play a vital role in determining and applying materiality. A brief description of the primary roles of each position are provided; as this is an important part of understanding their responsibilities in regards to auditing procedures and materiality. Internal controls play an important role in auditing procedures; CICA Handbook, Section 5200.05 states that, “Internal control systems are designed to provide reasonable assurance that; transactions entered into are authorized, generally or specifically, by management, if transactions are properly recorded, assets are properly safeguarded and accurate records are maintained” (CMA Canada 2008). Managers should implement proper internal controls as they play an important role in auditing and materiality. Without these internal controls; misstatements, errors, and in some cases fraud may become more recurrent. Applying these internal controls provide assurance to managers, by decreasing the chance of both immaterial and material misstatements. It is an external auditor’s obligation to identify and inform clients of any misstatements or errors in the financial statements, whether they are considered material or immaterial in nature. As mentioned previously an agreement between the client’s manager and auditor is needed to establish the materiality level and guidelines for an audit to be performed. Once these guidelines and materiality level are developed they are used as a benchmark for the auditor to determine whether misstatements are material or not. When these misstatements are detected it is necessary to decide what action, if any should be taken. Audit committees are commonly found in larger corporations and often cooperate with external and ... ... middle of paper ... ...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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