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What is this benchmark in materiality all about?
1/ 2% – 1% revenue, 1% – 2% total asset, 5% -10% Profit befor tax ?
Please explain each 1 of them? And What is this performance materiality in short?An item is material if it would cause the economic decisions of a user of the FS to change. However, this is a judgement call, made by the audit partner. The junior staff out doing the audit need guidance as to what might be material – certainly matters worth reporting to the partner. Obviously an error of $5 in a multi-dollar business is not material, but an error of 10% of the profit would probably be. That’s what these benchmarks are for.
They are not definitive and 0.25% of revenue could be more than 10% of profits: they are guides only.
Performance materiality is where materiality limits are lowered in case several small errors all add up the same way and together amount to a material error.
thanks for your reply.
so these benchmarks are just defined by the seniors auditor right???They are defined at the audit planning stage, probably by the audit manager.
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