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Audit
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Planning and
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Materiality
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Krisler Ompusunggu U n
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Online Class

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Unsoed S1 Accounting
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Subject Audit I
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8 May 2021
Ground Rules
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1. Your video should be always turned
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ON – a cool background is strongly
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recommended

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2. Check-in your attendance at the
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given channel
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https://forms.gle/WbiJoTvtADv5QxP
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3. Active participation
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Let’s have some sahur first
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Our Topics This Semester
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Before Mid
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• Audit Reports
• Audit Evidence 8 M
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After Mid
• Audit Planning and Materiality U n
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• Assessing the Risk of Material Misstatement

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• Assessing and Responding to Fraud Risks

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• Internal Control and COSO Framework
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Agenda 2 1
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1 Planning the audit
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2 Audit Materiality

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Let’s Try

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 2 1
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a y
Planning
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the Audit d
(ISA 300)
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ns
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Overview of audit process
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Planning and
understanding
Test of control

e d Fieldwork

s o
U n
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reportl a
Issuing audit
Closing
Drafting
report

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What is planning the audit?
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d
“ “
By failing to plan, we
are planning to fail
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What do we do during planning
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Planning consideration
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• Understanding the client, their business, needs and requirements
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• Determine the key engagement team 8 M
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• Consider the involvement of experts
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• Determine the audit materiality U n DOCUMENTED

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• Risk of material misstatement
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• Audit plan
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Determine the engagement team
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Determine the engagement team
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Senior Associate
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Engagement s o
Manager
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Engagement I
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Partner
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 2 1
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Audit a y
Materiality
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(ISA 320)
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What is Material?
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• Misstatements are considered to be material
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if they, individually or in the aggregate, could
reasonably be expected to influence the
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economic decisions of users taken on the
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basis of the financial statements,
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• Judgments about materiality are made in light
of surrounding circumstances, and are
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affected by the size or nature of a
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misstatement, or a combination of both, and

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• Judgments about matters that are material to

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users of the financial statements are based
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on a consideration of the common financial
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information needs of users as a group.
When do we apply materiality
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Recap
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Collect evidence
Identify
misstatements misstate

e d Evaluate
scope
an
opinion

o
ments

n s
s U
l a s
Meet
criteria?

I C Adjusted
?
within
scope?

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Understanding Materiality
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Materiality a y
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A judgement amount where financial information has the
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ability to affect economic decisions of users or the discharge of

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accountability by management or those charged with
governance if the part of the information is misstated, omitted
or not disclosed
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Understanding Materiality
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Performance Materiality a y
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A judgement amount determined by the auditor, based on
the assessed level of risk at the financial statement level,
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which is less than materiality for the financial statements

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as a whole. This amount is considered necessary to reduce
to an appropriately low level the probability that the

s
aggregate of uncorrected and undetected misstatements is
s
greater than materiality

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Quantitative Approach
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Qualitative Approach
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• Carry-over effect from prior year audit
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• Incident or allegation of fraud 8 M
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• Other reasonable concern
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 2 1
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Let’s Try a y
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Case study (10 minutes)
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1. You are the auditor of a company listed in the IDX
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<pick a listed company, should be unique>
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2. Look for the company financial statements YE 31
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December 2020
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3. Determine the materiality and performance n
materiality (quantitatively)
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4. Present your materiality to the class

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Quantitative Approach: Extended
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s o Private company

U n Public company

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Cl a Under-development
company, whichever
is consistent

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 Recap 2 1
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1 Planning the audit
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2 Audit Materiality

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Let’s Try

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Q&A 2 1
Q&A
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 2 1
Thank you!
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