Using Rules-of-thumb to estimate materiality: Evidence from Taiwanese publicly-listed firms
Author: An-De Siao
Advisor: ,Su - advisor,Li - chair,Ku - co-chair
Educational level: Master
Discipline: Business Administration
University: Dong Hwa University
Abstract: Professional standards have required that auditors to make a preliminary judgment about materiality levels in planning the audits, but no specific criterion has been given to the auditors to estimate the materiality levels. Without any specific guideline, in practice, a number of "rule-of-thumb" has been adopted by the CPA to calculate the materiality amount This study is based on Pany and Wheeler ”„s framework comparing companies in different industries using rule-of thumb analysis for the materiality judgment. Results show that auditors can obtain less evidences when”G1.use 1% of equity in the listed company at stock exchange market2.use audit gauge in the listed company at over-the-counter marketOn the other hand, auditors should obtain more evidences when”G1.use gross profit in the listed company at stock exchange market2.use gross profit in the listed company at over-the-counter market Finally, this study is based on Bernardi and Pincus”¦s framework to understand whether auditors make quantitative materiality judgments consistent with the ten rules of thumb by questionnaire. Results show that auditors make quantitative materiality judgments consistent with the ten rules of thumb.
Keywords: , professional judgment, rule of thumb, materiality levels