CDE Ltd. is engaged in manufacturing and has a turnover of ₹ 500 crores. During the audit, CA R, the auditor, determined materiality at the planning…

CA Intermediate · Auditing and Ethics · MTP · September 2026
CDE Ltd. is engaged in manufacturing and has a turnover of ₹ 500 crores. During the audit, CA R, the auditor, determined materiality at the planning stage based on a percentage of profit before tax. During the course of audit, certain misstatements were identified, individually immaterial but collectively approaching the materiality threshold. Further, management refused to correct some of these misstatements. At the completion stage, CA R re-evaluated materiality considering revised financial results and assessed the impact of uncorrected misstatements before forming the audit opinion. Which of the following statements correctly reflects the application of materiality as per SA 320?
(A) (a) Materiality is determined only at the planning stage and cannot be revised later.
(B) (b) Only individually material misstatements need to be considered by the auditor.
(C) (c) Materiality is applied in planning, performing, and evaluating the audit, including assessing uncorrected misstatements.
(D) (d) Once management refuses to correct misstatements, the auditor must automatically issue a qualified opinion.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

(c) Materiality is applied in planning, performing, and evaluating the audit, including assessing uncorrected misstatements.

Topics: Audit Report, Audit Strategy, Audit Planning and Audit Programme

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic