IMPACT OF AUDIT RISK AND MATERIALITY ON AUDITORS RESPONSIBILITY; CHM

INTRODUCTION  Auditing may be simply defined as the independent examination of the financial statement of an organization with a view to expressing an opinion as to whether these statements give a true and fair view and comply with the relevant statues. This opinion must be expressed in form report. The person who caries such examination is called the Auditor.           Audit Risk according to Oxford Accounting Dictionary defines Audit as a risk that an Auditor fails to qualify the audit report when the financial statements are materially misleading, i.e. do not give a true and fair view.           According to AICPA, section 312 and 35D, professional standards recognize that there is some uncertified when an auditor provides an opinion on whether an  entity’s financial statements are fairly presented, this uncertainty is known as Audit risk. Audit risk is a function of three risks, they inherent risk, control risk and detection risk. These should be considered by auditors when planning and evaluating the results of an audit. No authoritative guidance is provided on factors that should be considered when establishing materiality for planning or evaluating purposes. During the planning phase of an auditor establish materiality to determine the nature timing and extent of auditors establishes a quantitative amount of materiality during the planning phase. This quantitative amount is known as “planning materiality”.           Planning materiality is allocated to classes of transactions or accounts because auditor normally group related transact classes and account together to design and execute and audit strategy for each of these groupings (auditing cycle approach)           The auditors responsibility when conducting an audit is to provide reasonable assurance that the financial statements are fairly presented in all material respects. All section 312 of the AICPA professional standards notes that financial statements are materiality misstated when they contain misstatement whose effect, individually or in the aggregate results in financial statements that are not fairly presented faithfully.           Materiality assessments are a matter of professional judgment requiring auditors to consider the needs of individual financial statement users.




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