Auditing Standard No. 320 on materiality in audit planning and implementation, issued together with Circular 214/2012 / TT-BTC

Scope of application

1. This Auditing Standard specifies and guides the auditor's responsibility and corporate auditing (hereinafter referred to as an "auditor") in applying the concept of "materiality" in planning and performing the audit of financial statements. Vietnamese Auditing Standard No. 450 provides guidance on how to apply materiality in assessing the effects of detected misstatements on audits and assessing the effects of unadjusted errors (if any). ) for financial statements.

Materiality in the audit  

2. The financial reporting frameworks provide and provide guidance on the concept of materiality in preparing and presenting financial statements. Although the financial reporting framework deals with the concept of materiality in different terms, in general, materiality is construed as follows:

• Errors, including omissions, are considered material if they, when considered individually or combined, are considered to a reasonable extent, that could influence economic decisions. user's financial statements;
• Materiality judgments are made on a case-by-case basis and are influenced by the size or nature of the error, or are a combination of both;
• Judgments on matters of material to users of financial statements should be based on consideration of the general needs of the user group's financial information, such as investors, banks, creditors. , ... The possible effects of errors on a small number of people using information in the financial statements whose needs differ significantly from those of those who use information in the financial statements. will not be considered.

3. Materiality concepts, if specified in the financial reporting framework, will be the basis for the auditor to determine materiality of the audit. If the financial reporting framework does not present materiality, the characteristics described in paragraph 02 of this Standard will provide the auditor with a basis for determining materiality.
4. The auditor's determination of materiality is subject to professional judgment and depends on the auditor's perception of the needs of the users of the financial statements. In this case, the auditor may assume that, the user of the financial statements:

(a) Have a reasonable understanding of business, economic and financial, accounting, and have an interest in studying information in financial statements with reasonable care;

 (b) Understand that the financial statements are prepared, presented and audited on a material basis;

 (c) Recognizing the potential uncertainty in determining the value resulting from the use of accounting estimates, judgments and factors of future events;

 (d) Make sound economic decisions on the basis of information in the financial statements.

5. The auditor shall apply the concept of materiality both in planning the audit and performing the audit, in assessing the effects of identified misstatements during the audit, including the effects of errors. unadjusted deficiencies (if any) to the financial statements and when forming the auditor's opinion (Ref: Para. A1).
6. In planning the audit, the auditor makes judgments about the extent of the misstatements that would be considered material. These judgments provide the basis for:

(a) Determine the content, schedule and scope of the risk assessment procedures;

(b) Identify and evaluate the risks of material misstatement;

(c) Determining the content, schedule and scope of follow-up audit procedures.

In the planning of the audit, materiality identified is not necessarily a level of value but below that, unadjusted flaws, when considered individually or collectively, are always assessed as non-material. weak. In certain cases, a defect may be assessed as material even though its value is less than material. While it is difficult to establish audit procedures to detect individual misstatements due to the nature of the failure, when assessing the effect of unadjusted misstatements on the financial statements At the same time, the auditor shall consider both the size and nature of the deficiencies and the specific circumstances under which they occur (Ref: Para.A16)

7. The auditor and the firm shall comply with the requirements of this Standard in the auditing of financial statements.

The audited entity (customer) must have certain knowledge of this International Standard in order to coordinate the work and to deal with the relationships involved in determining the materiality of the information to be audited.

See full text Auditing Standard No. 320