Abstract

This paper investigates materiality determination practices in ten audit firms in Bangladesh and explores the influence of financial statement users' information needs on auditors' decisions in regard to materiality judgements. To test audit materiality guidance, data were gathered through interviews with 10 senior auditors of the selected audit firms in Bangladesh and to assess the impact of information needs on auditor's materiality judgment, data were obtained from 100 practicing auditors through an online survey utilizing a structured questionnaire. The data collection employed a random sampling approach, and the analysis of the data was conducted using structural equation models. Findings indicate consistency in setting quantitative guidelines for net profit, total assets, total turnover or sales for determining the overall materiality level, percentage setting for overall materiality, tolerable misstatements, trivial misstatements, identified and undetected misstatements, and a significant impact of user information needs on auditors' judgments. The study offers valuable insights for accounting students, professionals, and standard setters, shedding light on practical application of materiality and its relation to user requirements, thus contributing new perspectives to the existing literature.

Keywords

Materiality, Misstatements, Information needs, Audit firms, Overall materiality.