i know it is a professional judgement made by auditor, but what's the benchmark % or base date for computing materiality and performance materiality? can someone also give an easy to understand definition of performance materiality?
According to ISA 320 Materiality (Quantitative Factors)
5% of Profit before tax.
1% of revenue.
Total Assets 1-2%.
The amount(s) set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole and the amount(s) set by the auditor at less than the materiality level(s) for particular classes of transactions, account balances or disclosures.
Easy Version: Applied where many transactions combine to form material. Normally set at a level lower then overall materiality. It is used for testing individual transactions,account balances and disclosures.
the isa never stated the benchmarks. correct me if am wrong. the benchmarks given above are traditional benchmarks. in determining whether or not an item is material is dependent on the auditors professional judgement
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