New Description of Materiality for Audit and Attest Engagements

The American Institute of Certified Public Accountants’ (AICPA) Auditing Standards Board (ASB) recently issued a new description of materiality for audit and attestation engagements.

The primary reason for this change is to align the materiality concepts of AICPA with other major accounting governing bodies in the U.S. The AICPA believes that the revised definition will substantially improve the consistency with current U.S. accounting firm practices with respect to determining materiality in audit or attestation engagements.  

The revised description of materiality is as follows:

• Misstatements, including omissions, are considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgement made by a reasonable user based on the financial statements.

The existing description of materiality is as follows:

• Misstatements, including omissions, are considered to be material if they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users made on the basis of the financial statements.

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