The document discusses the concept of materiality in auditing based on ISA 320. It states that materiality considers both the size and nature of misstatements in the context of the financial statements. Materiality thresholds vary between audit firms but commonly use benchmarks like 1-2% of revenue, 5-10% of profit before tax, and 5-10% of assets. Materiality is also assessed based on the significance of individual financial statement items and whether misstatements could impact trends in the financial statements. Materiality is determined during audit planning and is revised as the audit progresses if needed.
23. u
Materiality
Performance
Immaterial errors added together problem
u
24. u
Materiality
Performance
Immaterial errors added together problem
Lower than overall materiality
u
25. u
Materiality
Performance
Immaterial errors added together problem
Lower than overall materiality
Can vary from area to area
u
26. u
Materiality
Performance
Immaterial errors added together problem
Lower than overall materiality
Can vary from area to area
Revise as audit progresses
u
36. BUSINESS
Understanding
Discuss with Management
Discuss IC with IA
Analytical Procedures (ISA 520)
Observation (visits etc)
37. BUSINESS
Understanding
Discuss with Management
Discuss IC with IA
Analytical Procedures (ISA 520)
Observation (visits etc)
Inspection (manuals, plans & reports)
38. BUSINESS
Understanding
Discuss with Management
Discuss IC with IA
Analytical Procedures (ISA 520)
Observation (visits etc)
Inspection (manuals, plans & reports)