Notes

This week I learned that the users of the financial statements greatly affect the choice of the materiality base and percentage. Previously, I did not know how the materiality base was chosen, but would likely choose one based on the industry of the company we are looking at. However, I can now see that taking into consideration the objectives of the financial statement users when determining the materiality of the audit allows us to tie the materiality back to the purpose of the audit, that is, to ensure the users of the financial statements can rely on the information presented on those financial statements. Moving forward, I will ensure that I always try to compare the objectives of different users of the financial statements and work to find a materiality base that can adhere to most or all of the users' objectives.

This week I learned that a specific materiality can be used in an audit if there is a specific area of the audit that requires additional attention. This area of the financial statements may need additional attention in order to satisfy the objectives of a certain user/stakeholder, such as bank with loan covenants, or to satisfy the risk requirements of the audit, such as if that specific financial statement caption had fraudulent behaviour in a previous year's audit. While it was mentioned that specific materiality is typically is not necessary in many case settings, I will still ensure I keep this option at the back of my head in case I see an area where it may be useful to use.