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| Bangladesh Standard on Audit(BSA-320) |
What is the Bangladesh standard on Audit(BSA-320) ? Describes in details:
BSA-320: Materiality in Planning and Performing an Audit is a standard issued by the Institute of Chartered Accountants of Bangladesh (ICAB). It provides guidance on how auditors should determine and apply materiality when planning and performing an audit of financial statements.
In short, BSA-320 addresses the following key points:
1.Objective of Materiality:
The primary objective of this standard is to guide the auditor in determining materiality levels for the audit. Materiality helps auditors decide the nature, timing, and extent of audit procedures and assists in evaluating whether any misstatements, individually or in the aggregate, are significant enough to affect the financial statements.
2.Determining Materiality:
The auditor must assess materiality based on the size and nature of the item or aggregate of items in the financial statements, considering both qualitative and quantitative factors. Materiality thresholds should be set at the planning stage of the audit and may be adjusted during the course of the audit if necessary.
3.Application of Materiality:
Materiality is applied at both the overall financial statement level and the assertion level. This means that materiality guides decisions not only about the financial statements as a whole but also about specific account balances, transactions, or disclosures.
4.Consideration of Misstatements:
The auditor uses materiality to determine the significance of any misstatements identified during the audit. If the aggregate of identified misstatements exceeds the materiality threshold, the auditor must consider whether this requires adjustment in the financial statements or could result in a modification of the audit opinion.
5.Reevaluation of Materiality:
Materiality levels set at the planning stage should be reassessed throughout the audit if new information or circumstances arise that affect the audit approach. The auditor should adjust the materiality thresholds if there are significant changes in the risk or the nature of the audit.
6.Documentation:
The auditor must document the materiality levels determined for the audit and how they were applied to various audit procedures and evaluations.
In summary, BSA-320 emphasizes the importance of determining and applying materiality in a consistent manner throughout the audit process. This ensures that auditors focus on the most significant aspects of the financial statements and make informed judgments about the impact of misstatements on the audit opinion.