Group Audits, Group-Level Controls, and Component Materiality: How Much Auditing Is Enough?

ABSTRACT

Auditing standards now mandate that group auditors determine and implement appropriate component materiality amounts, which ultimately affect group audit scope, reliability, and value. However, standards are silent about how these amounts should be determined and methods being used in practice vary widely, lack theoretical support, and may either fail to meet the audit objective or do so at excessive cost. We develop a Bayesian...more