Connecting Judaic Rules to Two Fundamental Auditing Concepts: Materiality and Independence.

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Abstract

The concepts of materiality and independence have long affected financial statement users through their influence on auditors’ judgments, and are not restricted to auditing. Materiality is relevant to independence, conflict of interest, and transparency issues. We discuss the materiality considerations of preparer intent, user intent, and cost/benefit, and provide Jewish examples for each. By considering materiality from a different point of view, we intend to help auditors better understand the materiality concept. We examine independence in relation to conflict of interest, transparency, compartmentalization and the higher independence standards that those in a public position should hold. We also compare these concepts to various Jewish examples.

Authors

• Alan Reinstein, Wayne State University

• Shlomo Sawilowsky, Wayne State Uniersity

• Eileen Z Taylor, North Carolina State University