AskReaders Fact List

25 Insider Secrets Spilled by our Readers

Comments (4)
  1. T.a. says:

    #9 doesn’t follow the materiality rules per US Auditing Standards and is incorrect on the 3% threshold. I am an auditor as well and a $500 million fund’s / company’s materiality would be closer to $2,000,000 based off of US Auditing Standards. The 3% threshold is used, but it is calculated off of the tolerable misstatement, which is the $2,000,000. So any difference under $60,000 (3% times $2 million) is considered trivial and no audit entry is necessary. However, if any audit entry that is greater than $60,000 isn’t made, it is supposed to be logged and documented in the audit binder and presented to the client’s management. Both the auditor and the client must agree on not making an audit entry for the finding. If an accounting difference of $2,000,000 or more is discovered, then you have a material issue and will need to present this finding to the governing body of the company. If the company refuses to accept the material audit entry, then a qualified opinion or scope limitation will be made in the audit report. Basically this would just mean that the financial statements are materially correct, except for this one section of the financial statements. So… a $15 million difference is extremely material and would need to be looked into. I’m not sure how an audit firm can justify passing over a $2+ million difference. In addition to this, all differences under the 3% threshold that were passed over must be aggregated to determine if it has a material effect to the financial statements. If it does, all entries must be posted and presented to the governing body.

    tl;dr – The 3% materiality threshold would actually be $60,000. Any differences greater than that should be investigated and audit entries should be made. Most CPA firms that are presenting an opinion on a hedge fund or company’s financial statements will calculate materiality this way.

    1. Korbs says:

      Thanks for the info! I especially enjoyed the tldr summary (:

  2. JS. says:

    I call BS on #21. How many people go in to a “Levi’s” and start boasting about how rich they are. I mean this statement alone debunks it: “They would then fork out 1500 bucks or so an be on their way with their fu**ed up jeans, and we would replace them with another copy from the store room.”. Are all the jeans in the store room “fu**ed up” then that you can pass them off as a replacement?

    Here’s what probably happened: They got an old pair of jeans, rich guy admires them, says he wants to buy them. You told him they’re not for sale, he boasts money isn’t an object, he wants them. You don’t sell them and he goes on his way, you then made up the above story and tell it to people like it’s the truth because it sounds cool.

  3. Emperor of Mankind says:

    f**k you mean I could just do a half ads job but aslong as I back it up I’m good. Wtf life really is easy

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