Materiality in Planning and Performing an Audit According to ISA 320

 

Performance materiality also refers to the amount or amounts set by the auditor at less than the materiality level or levels in the financial statements for particular classes of transactions, account balances or disclosures.

International Standard on Auditing (ISA) 320 requires auditor to determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures.

It requires to include in documentation on the materiality for the financial statements as a whole, and where necessary, the materiality level or levels for particular classes of transactions, account balances or disclosures.

It requires the auditor to determine at planning stage materiality at overall financial statement level, and where lower amount can impact the decision of user for specific transaction, balance and disclosure, such lower amount.

In essence, ISA 320 deals with the auditor’s responsibility to apply the concept of materiality in planning and performing an audit of financial statements.

 

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