Requirements

Includes: Determining Materiality and Performance Materiality When Planning the Audit, Revision as the Audit Progresses, Documentation

Determining Materiality and Performance Materiality When Planning the Audit

10

When establishing the overall audit strategy, the auditor shall determine materiality for the financial report as a whole.  If, in the specific circumstances of the entity, there is one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial report as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report, the auditor shall also determine the materiality level or levels to be applied to those particular classes of transactions, account balances or disclosures. (Ref: Para. A3-A12)

11

The auditor shall determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures. (Ref: Para. A13)

Revision as the Audit Progresses

12

The auditor shall revise materiality for the financial report as a whole (and, if applicable, the materiality level or levels for particular classes of transactions, account balances or disclosures) in the event of becoming aware of information during the audit that would have caused the auditor to have determined a different amount (or amounts) initially. (Ref: Para. A14)

13

If the auditor concludes that a lower materiality for the financial report as a whole (and, if applicable, materiality level or levels for particular classes of transactions, account balances or disclosures) than that initially determined is appropriate, the auditor shall determine whether it is necessary to revise performance materiality, and whether the nature, timing and extent of the further audit procedures remain appropriate.

Documentation

14

The auditor shall include in the audit documentation the following amounts and the factors considered in their determination:[5]

  1. Materiality for the financial report as a whole (see paragraph 10 of this Auditing Standard);
  2. If applicable, the materiality level or levels for particular classes of transactions, account balances or disclosures (see paragraph 10 of this Auditing Standard);
  3. Performance materiality (see paragraph 11 of this Auditing Standard); and
  4. Any revision of (a)-(c) as the audit progressed (see paragraphs 12-13 of this Auditing Standard).

5

See ASA 230 Audit Documentation, paragraphs 8-11 and paragraph A6.