Materiality Level in the Audit of Financial Statements and Its Impact on the Auditor's Professional Judgment

When developing a general audit strategy, the auditor determines the materiality of the financial statements as a whole. In addition, the auditor must determine the materiality of the results of the activity to assess the risks of material misstatement and determine the nature, timing and scope of further audit procedures. The article aims to summarize the basic principles of establishing the materiality level in the audit of financial statements and determine its impact on the auditor's professional judgment application. The use of the concept of materiality is an integral part of the general methodology that determines the procedure for conducting an audit of financial statements. The article reveals approaches to assessing the materiality level in an audit based on an analysis of the provisions of international auditing standards. It was revealed that the complexity of determining materiality lies in that each user has their own interests, which determine what material is to them in the financial information received. The article presents an algorithm for determining materiality in an audit based on applying the auditor's professional judgment. Considerable attention in the study was paid to the features of the regulatory regulation of the mechanism for calculating materiality at the level of financial reporting as a whole and for performing audit procedures. At the same time, there are no unified rules and methods for determining the materiality level today. Instead, in audit practice, the working materiality level is set as a percentage of materiality for financial reporting as a whole according to the auditor's professional judgment, depending on the assessment of the risks of material misstatement: low - 75-80%; medium - 60-70%; high - 40-65%. The article presents typical financial reporting misstatements and the reasons for their occurrence. The study's results will allow auditors to better understand the impact of material errors on the reliability of financial reporting and audit results, as well as the relationship between audit risk and the materiality indicator for performing audit procedures.