What Does “Materiality” Really Mean?

Chewning, Eugene G.; Higgs, Julia L.

doi:10.1002/jcaf.10071

Cited by 13 publications

(13 citation statements)

References 3 publications

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“…There is a lack of consensus between accountants and auditors that leads to identification of different threshold levels of Materiality (Azzopardi and Baldacchino 2009;Chewning and Higgs 2002;Chong 2002;Friedberg et al 1989;Holstrum and Messier 1982;Iselin and Iskandar 2000;Maione 2004;Martinov and Roebuck 1998;Pany and Wheeler 1989;Pattillo 1976) and this is consistent with the literature on expert judgment (Ashton 1973;Joyce 1976). Iselin and Iskandar (2000), summarizing the literature, find a wide range of thresholds ranging between 2-7% and 20%.…”

Section: Hp1c: the Level Of Association Is The Key Factor (Ie The Isupporting

confidence: 70%

“…Materiality has also been addressed by several Italian studies (CNDCEC doc 320; Livatino et al 2000;Livatino et al 2007;Maione 2004;Pecchiari 2003;Russo 2004;Tartaglia Polcini 1996) which confirm the main results of international studies. These quantitative percentages can be based on equity, total assets, revenues and earnings before taxation (Blokdijk et al 2003;Eilifsen and Messier 2014;McKee and Eilifsen 2000;Chewning and Higgs 2002;Leslie 1985). Prior literature on Internal Control Deficiencies (Bedard and Graham 2011;Mazza and Azzali 2015) identify the most severe and persistent Internal Control Deficiencies in revenue.…”

Section: Literature Review and Hypothesismentioning

confidence: 99%

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Effects of Materiality Assessment on Internal Controls over Financial Reporting Maturity

Azzali¹,

Mazza²,

Fornaciari³

et al. 2018

IJBM

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The paper investigates the effects of materiality assessment on Internal Controls over Financial Reporting (ICFR) Maturity. Based on private data collected from Italian listed companies, the paper aims to provide a unique score for assessing ICFR Maturity of a company and to assess the effect of quantitative and qualitative factors used to evaluate materiality. Specifically, it examines the processes used to identify significant entities, significant accounts and associating accounts with process. A Partial Least Squares (PLS) Path Modeling approach is used. Among quantitative factors, total assets, sales and earnings before taxation are the best accounting measures used by companies to select entities, while income statement value is more useful than the balance sheet in selecting significant accounts. This last activity is relatively more relevant that the others. Scoping results show: 1) the importance of identification of entities at group level; 2) multiple association accounts – processes is better than single association. Finally results show different effects on ICFR Maturity for the manufacturing and services industry and for the financial industry.

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Section: Hp1c: the Level Of Association Is The Key Factor (Ie The Isupporting

confidence: 70%

Section: Literature Review and Hypothesismentioning

confidence: 99%

Effects of Materiality Assessment on Internal Controls over Financial Reporting Maturity

Azzali¹,

Mazza²,

Fornaciari³

et al. 2018

IJBM

View full text Add to dashboard Cite

show abstract

“…The US Securities Exchange Commission (SEC) (1999, p. 1) warned that blindly following a numerical rule of thumb in materiality decisions is clearly not acceptable because "misstatements are not immaterial simply because they fall beneath a numerical threshold". The SEC asserted that company management and auditors need to also understand the client's situation and the risks that are represented by qualitative considerations in reporting and disclosure decisions (Chewning & Higgs, 2002).…”

Section: Professional Judgement On Materialitymentioning

confidence: 99%

“…Fogarty, Graham, and Schubert (2006) further claried that auditors should consider the needs of users as a group, not just the needs of specific individuals. Hence, Chewning and Higgs (2002) have suggested that financial statements should disclose information that affects stakeholder decisions, based on their perceived needs (Gist & Shastri, 2003). The implication is that "if investors believe that more environmental disclosure is necessary to make informed investment decisions, then such information is by definition material" (Rogers, 2004, p. 55).…”

Section: Professional Judgement On Materialitymentioning

confidence: 99%

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The consideration of environmental matters in the audit of financial reports

Chiang¹

2010

Journal of Accounting &Amp; Organizational Change

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Enhancing the materiality principle in integrated reporting by adopting the General Systems Theory

Aprile

Alexander

2023

Corp Soc Responsibility Env

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This article aims to explore the effectiveness of the materiality principle (MP) within Integrated Reporting (IR) by applying the General Systems Theory (GST) of Ludwig von Bertalanffy. GST, within its holistic approach, can be used to identify the main sub-systems in which the regulation of IR can be articulated and the relationships between themselves, to make the MP effective, thereby improving the quality of the IR regulation. While much research has analyzed the materiality assessment and its impact on disclosure, little is known about how regulation affects the effectiveness of this principle. This research addresses this gap by explaining that materiality is not a stand-alone principle but needs to be supported by other principles to be effectively enacted. Our findings can improve the materiality assessment by providing a better understanding of the materiality meaning that can be helpful for managers, standard setters and professional bodies. In terms of research implications, this provides a framework for an alternative thought process for simplification without sacrificing the proper breadth of stakeholder focus.

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What Does “Materiality” Really Mean?

Cited by 13 publications

References 3 publications

Effects of Materiality Assessment on Internal Controls over Financial Reporting Maturity

Effects of Materiality Assessment on Internal Controls over Financial Reporting Maturity

The consideration of environmental matters in the audit of financial reports

Enhancing the materiality principle in integrated reporting by adopting the General Systems Theory

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