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Is materiality by fund balance or transactions?
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Answer / chalapathi rao govada
As per AAS -13, the term materiality is a relevent concept
which means it will depends on terms and conditions of the
situation.
Materiality ref to The transaction which can influence the
decisions of users of financial statements.
So what is material in one situation may not be material in
another situation.
So some transactions may be material if the amount involved
in such transaction is material.
Even though one particular transaction is also material
eventhough it doesnt involve a small fund balance depending
on the nature of such transaction and the the manner in
which it is going to influence the decisions of users of
financial statements.
So depending on the facts and circumstances of the
transaction even a single transaction may be material.
One transaction may not be material singly, but it is
material in aggreage with other transactions.
So the auditor should excercise his professional judgement
to decide the materiality considering the facts and
circumstances of eacha and every transactins.
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