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Hi Mr Mike,
I hope all is well!
I have a question as regards materiality, I realise this is a basic question, however, reading the examiner comments, I notices he always comments that students have issues with materiality, so I want to confirm.
The below are some benchmarks
Revenue (0.5% to 1%)
Total Assets (1%to 2%)
Profit after tax(5%to10%)I realise I have to ensure whether it is suitable to use the revenue (or others ) as a benchmark or not based on the error itself and its place in the financial statements, however, suppose we are using PBIT as a benchmark and the error represents 6% of profit, will it be material falling in between? I say yes. (This is putting materiality by nature aside). But I would appreciate some guidance on materiality and on how best to assess an error’s materiality as it is very important.
Many thanks.
Maha
The percentages at only a guide to be used in planning in order that the audit team may appropriately concentrate on risk areas. But if an error falls between the two extremes, enquiry should be made of the audit partner.
Maybe materiality values need to be changed
Does that answer it?
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