... smallest estimate for purposes of developing your audit plan. If o $100,000 would materially misstate income, and o $200,000 would materially misstate total assets Your audit plan should be designed to detect omissions or misstatements, that individually or in the aggregate, equal $100,000. Account Balance Level - Allocate materiality to each account. Remember that financial statement audits are done on an account by account basis. Therefore, you need to estimate how much error you can tolerate in each account before you conclude that the account is materially misstated. Two ways to allocate materiality. See page 229. o In proportion to the account's balance. This is the more mechanical approach. o In proportion to how difficult it is to audit the account. This is a more judgemental approach. Materiality and Evaluation of Audit Findings * The auditor aggregates errors the client has not corrected. These include o known misstatements - errors ...

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