Study On The Audit Materiality Judgment And The Influencing Factors

For a long time,the modern audit studies are focusing on the topic of audit risk,but very few studies are looking at the issue of audit materiality level.The audit materiality level plays an important role in the implementation of audit work.First,the determination of the audit materiality level can effectively improve the efficiency of audit and reduce the cost of audit.Second,it helps to prevent audit risk and improve audit quality.With the continuous expansion of business volume and scale of enterprises,the complexity and difficulty of auditing work is also increasing.In order to improve the audit materiality level and reduce the audit cost,normally auditors will use the audit sampling method to select sample from all accounting data,and then infer overall quality of financial reporting based on the audit results.In the process,the choice of the audit sampling sample has big impact on the sampling results and determines whether the sampling process is reasonable and effective,however,the audit materiality level work can effectively solve the problem and prevent audit risk raise and improve audit quality.The concept of the audit materiality level has been put forward after the extensive application of audit sampling.The main function of the audit materiality level is to reduce the audit risk,ensure the audit quality and improve the audit work efficiency.The audit materiality level plays an important role in the various stages of the auditing procedure from audit plans to completion.In recent years,the audit failure cases are increasing,it is necessary to do further research on how to determine the audit materiality level.In order to improve the audit quality and reduce the audit risk more effectively,it is necessary to analyze the theoretical basis,judgment process and application of the audit materiality level that auditors have better abilities to make professional judgments.The audit materiality level is a kind of subjective judgment that auditors have to made and the judgment could influence information users' judgment or decision.The judgment has to be made to determine to what extend financial statements from client company are suffering misstatement or omission under a particular environment.This paper is mainly to research the judgment of the audit materiality level and the influencing factors.First of all,the research background,the research significance,the research thought and the time frame and related research at home and abroad are expounded.Second,the relevant theories about the audit materiality level are introduced.The paper introduces the concept,function and meaning of the audit materiality level and also introduces the basis of the judgment of audit materiality level from accounting firm,the client company and certified public accountant.Then,the research make a concrete analysis of judgment of the audit materiality level and application process based on the specific audit case of Pan-China Certified Public Accountants with mathematical explanation theory,economic value of information theory and accounting theory.Finally,the paper make the conclusion that auditors make judgment of the audit materiality level should fully understand their client company,considering industry characteristics of client company and select the appropriate method to assign the importance level of audit to each segment.In conclusion,when determining the audit materiality level,auditor should fully understand the nature of their client company,as well as the specific types and nature of audit work.When auditor conducts audit,management should be advised by auditor to behave in an honest manner and management should also be remind the consequences by auditor if they do not act in good faith.At the same time,auditor should always monitor management's behavior during the audit process.When auditors are making their judgment,they should consider the characteristics of the industry of client company and based on financial statements,further more,in determine to what extent one issue could influence information users decision,auditor should stay at information users' perspective.Those information which are important for information users must be fully understand by auditor.As a certified public accountant,if they want to have a reasonable judgment to the audit materiality level,they should choose proper method to distribute level of importance at certain level and use the fixed ratio method or distribution method to determine the level of importance of financial statements,however,those judgment are based on some financial indicators,such as net assets,net profit,operating income or total assets,etc.As certified public accountants,they need to determine the percentage for those financial indicators based on their own experience or simply industry standard.