- This topic has 1 reply, 2 voices, and was last updated 10 years ago by
.
- Posts
Hi Mike,
The materiality guidance is set based on the percentage of profit, total asset and revenue.
When we would like to consider the materiality for example materiality of value of plant, we will consider it against the profit and total asset figures right ?
Do we also consider the materialty against the revenue figures as it seems there is no direct relationship between plant and revenue ?
Most importantly, if the plant is immaterial against profit and total asset and material against revenue, do we still modified the opinion if there is any error with it ?
Thank you.
You are correct to be selective on the basis of which benchmark against which t measure. And correct to consider that plant would not be measured against revenue because of a lack of any direct relationship.
Better would be to consider annual depreciation against revenue but that’s not going to be material against revenue and not material against profits!
Difficult to imagine a situation where plant is immaterial against assets and profits but IS material against revenue!
In the part of the World where I now do my lecturing, apparently the big 4 find an “average” value for materiality using a combination of calculations against revenue, profits and assets.
I don’t like to ask too closely how this works – it seems very strange to an “oldie” such as me
- You must be logged in to reply to this topic.