Materiality and Audit Opinion

Auditing Discussion questions
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Materiality and audit opinion
When the opinion is material then the decision has little effect on decision and hence it is an unqualified opinion, and when materiality level is material it affects decision being made and is qualified opinion (Kan, 2013). When the materiality level is highly material then issuing an adverse opinion or disclaimer and when there is no independence give a disclaimer. Essentially, materiality affects the audit risk when there is non disclosure of material information. The quantity and quality of misstatements helps to determine materiality, and this is dependent on contexts. The auditor decides on the level of materiality depending on audit tests done, with misstatements influencing decision making of users in financial reports.
Auditor’s responsibility, fraud and illegal acts.
Illegal acts related to violation of government regulations and laws, and a client’s illegal acts are attributed to the audit of a client’s financial statements, with the management and employees being responsible for the acts. The management has the primary reasonability to detect illegal acts (Kan, 2013). An auditor should inform the audit committee and the management when there is a risk of illegal acts. There is no assurance that auditors will detect indirect-effect illegal acts, but direct-effect illegal acts are similar to fraud.
One of the barriers to uncovering fraud is that people committing fraud are familiar with a company’s system and at times are familiar with how the audit process is being carried out (Rittenberg et al., 2011). Sophistication of fraud committed by those familiar to the company makes it difficult, as it is easier to manipulate accounts and financial statements. The information provided is at times not adequate for the auditor to evaluate.
Hence, the auditor should highlight more on the internal control of organizations being audited as this enables them to identify r...