Materiality Uncertainty and Earnings Misstatement
通过战略审计模型，分析重要性不确定性如何影响审计师对审计证据的评价和经理的盈余高报选择，发现审计失败成本高时，不确定性增加使审计师更保守、盈余高报减少；而审计程序成本高时则相反。
The concept of materiality provides a basis for auditors to ignore small misstatements, but the definition of “small” in this context is ambiguous. The issue of “materiality-standard-setting” has been raised recently by Arthur Levitt, former chairman of the Securities and Exchange Commission. We examine how materiality uncertainty affects the auditor's evaluation of audit evidence and a manager's choice of earnings overstatement in a strategic auditing model where earnings misstatements also include unintentional system error. We find that when the expected cost of accepting financial statements that are materially misstated, which we refer to as an audit failure, is relatively large, an increase in materiality uncertainty results in a more conservative auditor evaluation of the audit evidence and a decrease in the amount of intentional overstatement. Alternatively, if the auditor's expected cost of extending audit procedures is relatively high, then an increase in materiality uncertainty results in a less conservative auditor evaluation of the audit evidence and an increase in the manager's earnings overstatement. The auditor also becomes increasingly conservative as the report increases when the information system is sufficiently noisy. Finally, when the expected cost of audit failure is large, the equilibrium audit risk can increase or decrease in materiality uncertainty despite the corresponding increase in auditor conservatism and decrease in intentional overstatement. Audit risk is the average probability of audit failure across all possible evidence outcomes.