3.0 - Materiality

Question 1

Define materiality

Answer 1

An expression of the relative significance or importance of a particular matter in the context of financial statements as a whole (how important something is in the financial statements)

Question 2

What does the IFRS Conceptual Framework for Financial Reporting say about materiality?

Answer 2

States that a matter is material if its omission or misstatement could influence the economic decisions of users taken on the basis of financial statements

Question 3

Define performance materiality

Answer 3

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 (safety buffer to catch small errors before they grow)

Question 4

ISA 320 Materiality in Planning and Performing an Audit states ‘materiality and audit risk are considered throughout the audit, in particular when:”

Answer 4

• identifying and assessing the risks of material misstatement
• determining the nature, timing and extent of further audit procedures
• evaluating the effect of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report