Materiality guidelines for modifying audit reports

Review of the audit statements of 840 companies that disclosed accounting changes on their income statements reveals that smaller firms were less likely to find the changes material and modify reports on that basis. The largest companies, with assets over $5 billion, appear to always report such mod...

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Bibliographic Details
Published in:Journal of accountancy 1995-07, Vol.180 (1), p.89
Main Authors: Jordan, Charles E, Clark, Stanley J, Pate, Gwen R
Format: Magazinearticle
Language:English
Subjects:
Accountants
Accounting
Accounting changes
Accounting policies
Audited financial statements
Auditing
Auditing standards
Auditors
Auditors reports
Audits
Disclosure statements (Accounting)
Guidelines
Materiality
Principles
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Summary:Review of the audit statements of 840 companies that disclosed accounting changes on their income statements reveals that smaller firms were less likely to find the changes material and modify reports on that basis. The largest companies, with assets over $5 billion, appear to always report such modifications. The materiality decision is up to the auditor's judgment, but when greater figures, and therefore greater liability risks, are at stake, auditors are more inclined to disclose.
ISSN:0021-8448
1945-0729