Describe the importance of materiality for auditors and explain how materiality is determined in audits of state and local governments that follow GASB standards.
What will be an ideal response?
Materiality, in the auditor's judgment, is the level at which the quantitative or qualitative effects of misstatements will have a significant impact on users' evaluations. The AICPA Audit and Accounting Guide State and Local Governments requires auditors to make separate materiality determinations for each opinion unit. Under GASB standards these opinion units are governmental activities, business-type activities, aggregate discretely presented component units, each major governmental and enterprise fund, and the aggregate remaining fund information.
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