What is Materiality?

What is materiality? 

Materiality refers to quantitative and qualitative omissions or misstatements that make it probable the judgment of a reasonable person would have been changed or influenced.

These omissions or misstatements can be individually or in the aggregate material.

Accountants and auditors are concerned about this. Remember what will be in your reports:

• Review report: "Based on my review, I am not aware of any material modifications that should be made...."
• Audit report: "In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ....."

Materiality needs to be considered at two times, in

• Planning the audit and designing audit procedures.
• Evaluating whether financial statements taken as a whole are presented fairly, in all material respects, is accordance with GAAP.

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