Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

When considering the concept of materiality, which aspect is LEAST important to the auditor?

1. Adequacy of disclosure of a client's illegal act

2. Decision on positive or negative confirmations

3. Effects of direct financial interest on independence

4. Discovery of weaknesses in internal control

The correct answer is: Effects of direct financial interest on independence

The correct answer is based on the role that materiality plays in the auditing process. Materiality relates to the significance of financial information or discrepancies that could influence the decision-making of users relying on the financial statements. In assessing materiality, auditors weigh factors like the adequacy of disclosures regarding illegal acts, the implications of confirmations in terms of their ability to provide reliable evidence, and weaknesses in internal controls that may affect the accuracy of financial reporting. Each of these aspects has a direct relationship with how financial information might mislead users or fail to present a true picture of the financial health of an entity. However, while the effects of direct financial interest on an auditor's independence are crucial for ethical considerations and maintaining objectivity, they are less directly tied to the concept of materiality itself. Independence issues can affect the auditor's ability to perform an audit effectively, but they do not specifically relate to how materiality is measured or assessed in financial terms. This makes the consideration of direct financial interests as less important in the context of materiality compared to the other options listed. Thus, it stands out as the least important aspect when auditors focus on materiality in their audits.