How does the materially of the item being audited affect the reliability which the auditor places on analytical procedures ? Can u also give examples
There is an inverse relationship between materiality and the level of audit risk. As the assessed risk increases, the amount of difference considered acceptable without investigation decreases in order to achieve the desired level of persuasive evidence. Analytical procedures are applied as risk assessment procedures. Planning of analytical procedures is influenced primarily by materiality. If an item is material, auditor may not completely rely on analytical procedures. Example Debtors having a large unusual outstanding balance. .