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At.2506 Determining Materiality

The document discusses the concept of materiality in auditing. It defines materiality and how it relates to an auditor's objectives and audit risk. It also discusses how to determine materiality levels, including using benchmarks and percentages, and how to apply materiality to particular financial statement items and determine performance materiality.

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168 views26 pages

At.2506 Determining Materiality

The document discusses the concept of materiality in auditing. It defines materiality and how it relates to an auditor's objectives and audit risk. It also discusses how to determine materiality levels, including using benchmarks and percentages, and how to apply materiality to particular financial statement items and determine performance materiality.

Uploaded by

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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Professional Review and

Training Center (PRTC)

Determining Materiality
(AT.2506)

Leomar R. Cabarles
Concept of
Concept of Materiality
Materiality
Materiality and
Materiality and Auditor’s
Auditor’s Objectives
Objectives

Reasonable
assurance

Auditor IAR
F/S
free from material
misstatement
Materiality in
Materiality in Audit
Audit

Smallest aggregate misstatement

Could be material

To any one of the F/S


Materiality vs.
Materiality vs. Other
Other Concepts
Concepts

Materiality

Audit Risk
Audit Procedures
Audit Evidence
Materiality Levels
Materiality Levels
Benchmark and
Benchmark and Percentage
Percentage (%)
(%)

• Benchmark = F/S
information which users
base on in decision making

• Percentage (%) = level of


misstatement judged to be
material

Users’ information needs drive materiality


Particular F/S
Particular F/S Items
Items Materiality
Materiality
Performance Materiality
Performance Materiality
Performance Materiality
Performance Materiality
Revision of
Revision of Materiality
Materiality
Not a materiality; rather, a cutoff for
unimportant misstatements
Materiality Levels
Materiality Levels and
and CTMT
CTMT Summary
Summary

D Whole F/S Items


O Materiality Particular F/S Items
U
C Materiality
P
U D
M A
E Performance Performance T
N materiality materiality E
T (Tolerable (Tolerable D
E Misstatement) Misstatement)
D

Clearly trivial misstatement threshold

Professional Judgment
Application of
Application of Materiality
Materiality
F/S Level Materiality = P24,000
Application of
Application of Materiality
Materiality
DIY Drill Answers
DIY Drill Answers
DIY Drill Answers
 end of AT.2506 

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