Question
You have observed this accounting phenomenon: Corporate auditors normally use the quantitative rules of thumb to set materiality threshold. For example, if misstatement of an
You have observed this accounting phenomenon:
Corporate auditors normally use the quantitative rules of thumb to set materiality threshold. For example, if misstatement of an item in sale is less than 0.5% of total sales, the auditor would consider this misstatement is trivial (immaterial) and might not include it into the report or initiate further investigation.
However, government auditors often set a far stricter materiality threshold. They often stay alter on some issues which involve very small amount of money, which may be overlooked if the rules of thumb apply.
You have noticed a theoretical perspective of accountability literature. It states that if auditors suffer higher pressure from accountability, they would like to make stricter materiality threshold.
Required:
(1)Apply the perspective of accountability that you noticed to interpret this accounting phenomenon. (8 marks)
(2)Use this case as an example to discuss rationale of generalizing the traditional accounting concepts from a business setting to the public sector setting. (6 marks)
(3)Use this case as an example to discuss how a practical accounting technology can be developed into the public-sector context. (6 marks)
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