What does the term "materiality" refer to in auditing?

The term "materiality" in auditing refers to the significance of financial statement information to users. It is a crucial concept that determines whether information is relevant or important enough to influence the decision-making of stakeholders. If omitted or misstated information could affect users' understanding of a company's financial health, then that information is considered material.

In the context of auditing, professionals assess materiality to identify which aspects of the financial statements require more scrutiny and to evaluate whether discrepancies could impact users' decisions. This concept ensures that the information presented is not only accurate but also presented in a manner that is useful and meaningful for users, guiding them in making informed decisions based on the financial statements.