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Materiality in the context of audit: the real expectations gap

Keith A. Houghton (Australian National University, Canberra, Australia)
Christine Jubb (Australian National University, Canberra, Australia)
Michael Kend (RMIT University, Melbourne, Australia)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 28 June 2011




This paper seeks to focus on the issue of materiality judgements and the need for public disclosure of materiality levels. Insights about the concept of materiality are drawn from the words of users of audited financial reports, auditee managements, suppliers to the market for audit services and auditing standard setters and regulators.


This paper reports findings arising from face‐to‐face office interviews with individuals representing identified groups of stakeholders in the market for audit services about the issue of “materiality” as this concept is applied in auditing. The interviews canvassed many issues related to audit as part of a larger project entitled “The future of audit”.


In general, stakeholders perceive that the concepts involved in audit materiality are not well understood and they point to the difficulty in providing educative materiality about it, especially in relation to qualitative materiality, to retail investors in particular. There are mixed views as to whether the actual level of tolerable error, as per one of the meanings of materiality in the audit space, should be disclosed, with some feeling that it might be detrimental or dangerous.

Practical implications

If incremental information about materiality is to be disclosed, the issue of where, what to whom, by whom and when arise. Various suggestions are made by stakeholders in respect of these questions.


The paper concludes by drawing from the insights gained by the authors through the comments of participant stakeholders to make recommendations that deal with the issue of audit materiality.



Houghton, K.A., Jubb, C. and Kend, M. (2011), "Materiality in the context of audit: the real expectations gap", Managerial Auditing Journal, Vol. 26 No. 6, pp. 482-500.



Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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