Determining audit materiality: the professional judgment

Abstract

There are several factors that influence the professional judgment of an auditor to determine the materiality, particularly in terms of the audited company, the audit company and the intrinsic auditor's characteristics.
The main goal of this paper is to know the main factors that influence the professional judgment of the auditor, when determining the materiality during audit planning.
The auditors, to define quantitatively the materiality, use benchmarking indicators and apply a percentage, which may vary mainly due to the risk of material distortion of company to audit. Thus, the higher risk of distortion evaluated for the audit company, the lower percentage will be applied, and vice versa.
According to the results, the main benchmarking indicators used by the auditor are the turnover, the assets and equity capital. The main qualitative factors that influence materiality determination are business, entities knowledge and the needs of the financial statements stakeholders.
So, the obtained results indicate that, to determine the materiality, the auditor's professional judgment choosing the benchmark indicator and the percentage to be applied is influenced by qualitative factors.