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Deloitte comments on AICPA's proposed amendments related to the definition of materiality

Published on: Aug 08, 2019

Deloitte & Touche LLP comments on the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) on its proposed Statement on Auditing Standards (SAS), Amendments to the Description of the Concept of Materiality, and its proposed Statement on Standards for Attestation Engagements (SSAE), Amendments to the Description of the Concept of Materiality.

An excerpt from the comment letter is shown below:

We support the efforts of the ASB to align the materiality concepts in the relevant SASs with the definition of materiality used by the U.S. judicial system, the auditing standards of the Public Company Accounting Oversight Board (PCAOB), the U.S. Securities and Exchange Commission (SEC), and the Financial Accounting Standards Board (FASB) (collectively the “U.S. judicial system and other U.S. standard setters and regulators”). We also agree with the ASB’s proposed amendments to the guidance in the SSAE such that the materiality concepts in the suite of AICPA Professional Standards are consistently applied.

D&T does not anticipate that these amendments will have any significant practice implications in the determination of materiality in an audit or attestation engagement (refer to our response to Issue 2), and we believe that it is in the public interest to align the manner in which materiality is conceptualized in connection with performing audits and attestation engagements within our U.S. jurisdiction so as to avoid any unintended consequences and unnecessary confusion.

One concept that may warrant further clarification relates to use of the phrase “materiality level or levels” as stated in paragraph 10 of AU-C section 320, Materiality in Planning and Performing an Audit. Confusion exists as to whether this phrase refers to the testing that is intended to be performed, or whether the materiality level(s) are intended to address the evaluation of misstatements for those particular classes of transactions, account balances, or disclosures. We believe the intention of this sentence relates to the evaluation of misstatements, and request the ASB amend the last sentence of paragraph 10 of AU-C section 320 to address this practice issue as follows; “… materiality level or levels to be applied to those particular classes of transactions, account balances, or disclosures when evaluating whether the financial statements are materially misstated.”


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