Empirical Study on the Implications of Qualitative Factors in Making Decisions Related to the Materiality Level: The Case of Romania

Abstract

The paper aims to present the importance of qualitative factors in determining the materiality level in an audit mission. According to the literature a quantitative approach of materiality is insufficient for appropriate decisions, therefore it is required a more serious treatment of this issue. Data collected in the research were processed using the Ordered Logit Model, and the results showed that there is a significant correlation between the materiality level and the sectors in which the audited companies operate, the auditor's experience in the field and the longevity of the relationship with the client. There is no any correlation between the materiality level and the needs of the users of financial statements or the management objectives. ARTICLE INFO

Influence of auditor's gender, experience, rule observance attitudes and critical thinking disposition on materiality judgements

“…Earlier studies such as Messier (1983) and Krogstad et al (1984) illustrate that as materiality judgements are complex and infrequent, experienced auditors are more capable of making accurate materiality decisions than less experienced auditors. More recently, Popa et al (2013) also demonstrate that experience in a certain sector affects the level of materiality chosen by auditors. The study shows that experienced auditors in a sector have higher materiality thresholds than those who are less experienced in that sector.…”

“…Literature also illustrates that the same is true for judgements made by auditors in the area of materiality (Carpenter & Dirsmith, 1992; Krogstad et al, 1984). Auditors with more experience have been found to make more accurate materiality judgement decisions than less experienced auditors (Carpenter & Dirsmith, 1992; Messier, 1983; Popa et al, 2013). Findings from prior studies have also recommended that complex judgements should be made by more experienced auditors whereas less experienced auditors should be assigned tasks involving straightforward judgement decisions (Lin et al, 2003).…”

“…Critical thinking disposition, while deemed as a necessary quality in auditors, has so far not been researched in the context of materiality judgements (Desai, Berger, & Higgs, 2016; Griffith, Hammersley, Kadous, & Young, 2015). Given the ongoing revisions in the auditing standards and the emphasis on qualitative aspects, we also examine if audit experience continues to have a beneficial effect on materiality judgements (Carpenter & Dirsmith, 1992; Krogstad, Ettenson, & Shanteau, 1984; Popa, Span, Dumitru, Dumitru, & Filip, 2013).…”

El origen de ingresos del auditor y calidad de la auditoría: el caso español

“…Pero todas las referencias descritas en la literatura son meras sugerencias, pues lo que prevalece en la determinación de las cifras de materialidad es la experiencia y el juicio profesional del auditor, de acuerdo con la NIA 320 (Quintero, 2017). A una conclusión similar llegan Popa et al (2013) aplicando un modelo logit ordenado, y concluyen que existe una correlación significativa entre el nivel de materialidad y la experiencia del auditor en el sector.…”

Econometric Model for Readjusting Significance Threshold Levels through Quick Audit Tests Used on Sustainable Companies

“…On the other hand, according to Messier et al [20], most of the studies consider significance from a quantitative point of view where the net profit is the most used variable. However, at present, significance in audit is seen differently, and the focus relies more on the qualitative determining factors-the qualitative audit significance [11,43,50,51]-which, from our perspective, is closely related to a company's sustainability.…”