What is materiality, golden accounting role, auditing

Question

Accepted Answer

Materiality is the concept of determining the significance of an item or event in financial reporting and auditing.

Materiality is used to determine what information is important enough to be included in financial statements.
It is a subjective concept and varies depending on the size and complexity of the organization.
Golden accounting rule is the principle of consistency in accounting practices.
It ensures that financial statements are prepared using the same methods and assumptions from one period to the next.
Auditing is the process of examining financial statements and records to ensure they are accurate and comply with accounting standards.
Auditors use materiality to determine the scope of their audit and to identify areas of potential risk.
For example, a $10,000 error in a company with $1 million in revenue may be considered immaterial, but the same error in a company with $100,000 in revenue may be material.
The golden accounting rule ensures that financial statements are comparable over time, allowing stakeholders to make informed decisions based on consistent information.

Top Ernst & Young Assurance Consultant interview questions & answers