Using Judaic Rules to Develop New Perspectives on Auditors’ Materiality Decisions

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Abstract

The concept of materiality has long affected financial statement users through its influence on auditors’ judgments and decisions. The materiality concept is not new, nor is it restricted to auditing. While crucial in reporting and auditing judgments, materiality is also relevant to independence, conflict of interest, and transparency issues. To add a new perspective to the influence and application of materiality, we discuss the following materiality considerations: preparer intent, user intent, and cost/benefit, and provide Jewish examples for each. These examples demonstrate the complex nature of materiality judgments. By seeing materiality from a different point of view, we hope to help auditors better understand the materiality concept when applied in an auditing context.

Authors

• Alan Reinstein, Wayne State University

• Shlomo S. Sawilowsky, Wayne State University

• Eileen Z Taylor, North Carolina State University