ASA 320 requires the auditor to make a preliminary assessment of materiality to establish an appropriate quantitative materiality level to plan risk assessment procedures, further audit procedures, selection strategies and other audit procedures for the financial audit. In addition to considering qualitative factors, a quantitative materiality level is calculated by applying a percentage, based on the auditor’s professional judgement, to the appropriate benchmark or benchmarks, which may include:

  • total gross assets;
  • net assets;
  • total member entitlements;
  • total gross income; and
  • total expenses.


The auditor uses the preliminary quantitative materiality level and the assessed risk of material misstatement at both the financial report level and at the assertion level, for classes of transactions and account balances, to determine the nature, timing and extent of audit procedures for the financial audit.


In assessing the materiality of any misstatements identified during the audit and their impact on the auditor’s report, the auditor considers both quantitative and qualitative factors. Qualitative factors which the auditor considers include:

  • the significance of a misstatement to the SMSF;
  • the pervasiveness of a misstatement; and
  • the effect of a misstatement on the financial report as a whole.


ASA 450 requires the auditor to consider the possibility that the cumulative result of uncorrected misstatements below the materiality level could have a material effect on the financial report.