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Materiality

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Materiality

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Kim Smith.
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    Posts
  • August 24, 2021 at 5:28 pm #632781
    apipacca
    Participant
    • Topics: 9
    • Replies: 7
    • ☆

    Hi tutor ,
    I want to ask on when do we use materiality to the financial statement as a whole and when do we use the suggested benchmark (rule of thumb) materiality (like 0.5%-1% : revenue)…..?

    Thank you

    August 24, 2021 at 6:05 pm #632786
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8300
    • ☆☆☆☆☆

    For FS as a whole – when planning – performance materiality is then a lower amount.
    Then again for the evaluation of misstatements at the overall review stage (by which time it may be more or less than the “number you first thought of”).

    For the FS as a whole does use benchmark(s) that are appropriate in the circumstance e.g. if profit per the draft accounts is very small, you would be over-auditing to set materiality at 10% of profit, say, if that is less than 0.5% of total assets. (Remember IFRS is principally “balance sheet” focused – profit or loss is just the balancing figure/residual for the year.)

    For evaluating a misstatement against a relevant benchmark please see this post https://opentuition.com/topic/materiality-calculation-4

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