Materiality is assessed by determining how much of a unit’s financial information could be misstated, by error or fraud, without affecting the decisions of reasonable financial information users. Materiality is informed by management’s risk appetite and tolerance, considering quantitative as well as qualitative factors, which may include perceived reputational risk or compliance with regulations.
Risk appetite and tolerance is determined by management’s ability to tolerate deviation from acceptable outcomes relative to their objectives.
The risk assessment identifies and prioritizes risks based on their likelihood and the potential impacts on the university’s progress toward achieving its strategic objectives and priorities. Managers consider risks according to their established risk appetite and tolerance.
Read more about Responding to Risk.