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Dear Gromit,
How can we find out the range of preliminary materiality ?
Thank you
This is covered in the notes and lectures: 0.5 to 1% of turnover etc then reduced to performance materiality.
Thank you for the reply.
000’s
Financial Statement Extracts 2014 2013
Revenue 21,960 19,580
Total assets 9,697 7,288
Profit before tax 1,048 248
MaterialityA suitable range for preliminary materiality is $97,000 $105,000.
How did they find the range?
Rev .05 – 1% = About 110,000 to 220,000
Total assets 1 – 2% = About 97,000 to 194,000
Profit 5 – 10% = 5,000 – 10,000So a big range. Of course, you can have zero profit yet lots of revenue and high total assets. Setting the preliminary materiality at, say, 10,000 would probably mean too much testing.
Looking at the other two, I’d probably go for 100,000.
It’s not an exact science!
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