Performance materiality

Performance materiality is an amount or amounts set below financial-statement materiality to reduce to an appropriately low level the probability that uncorrected and undetected misstatements together exceed overall materiality. It influences the auditor’s detailed testing and is set using professional judgement. The amount reflects factors such as the auditor’s understanding of the entity, past misstatements and expectations of current errors. It is a planning and performance tool and does not replace considering each identified misstatement and their aggregate at completion.