How materiality is established in an audit or a review

When accountants conduct an audit or review, they can’t test every transaction. Instead, they set a “materiality” threshold. This benchmark is used to obtain reasonable assurance in an audit — or limited assurance in a review — of detecting misstatements that could be large enough, individually or in the aggregate, to be material to the financial statements.

Income statement items warrant your auditor’s attention

Today’s auditors spend significant time determining whether amounts claimed on the income statement capture the company’s financial performance during the reporting period. Here are some income statement categories that auditors focus on.