Documente Academic
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Level of Beauty
(Based on votes)
Cherish
50%
Abby
24%
Other
25%
Karen
1%
Joana
25%
Joana
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Cherish
Abby
Karen
MATERIALITY IN
PLANNING AND
PERFORMING
AN AUDIT
(PSA 320)
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OBJECTIVE
To apply the concept of materiality appropriately in planning and
performing the audit.
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DEFINITION
Performance materiality (tolerable misstatements) means the
amount or amounts 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.
OTHER TERMS:
I Could Still Endure or Kaya Ko Pa Tiisin.
Ill Set a Limit or Hanggang Dyan Lang Kaya Ko Tanggapin.
I Need an Allowance or Kailangan Ko Nang Baon.
We cannot push the limit of Overall Materiality for us to have an allowance
for misstatements that we may not detect. This is the message of the phrase
highlighted in red font above.
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REQUIREMENTS
Determining Materiality and Performance Materiality when
Planning the Audit
Revision as the Audit Progresses
Documentation
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Materiality
for
Particular
Classes
of
Transactions, Account Balance and Disclosures
Could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements
Examples:
Whether law, regulation or the applicable financial reporting
framework affect users expectations regarding the measurement or
disclosure of certain items
The key disclosures in relation to the industry in which the entity
operates
Whether attention is focused on a particular aspect of the entitys
business that is separately disclosed in the financial statements.
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Performance Materiality
Less than materiality for FSs as a whole
Serves two purposes:
To allow for aggregation of immaterial amounts
To provide margin for possible undetected misstatements
Used to:
Assess ROMM
Determine nature, timing and extent of FAP
Possible approaches:
One PM level based on materiality for FSS as a whole, or
More than one PM level in relation to different items
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REQUIREMENTS
Determining Materiality and Performance Materiality when
Planning the Audit
Revision as the Audit Progresses
Documentation
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REQUIREMENTS
Determining Materiality and Performance Materiality when
Planning the Audit
Revision as the Audit Progresses
Documentation
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DOCUMENTATION
The audit documentation shall include the following amounts and
the factors considered in their determination:
a) Materiality for the financial statements as a whole;
b) If applicable, the materiality level or levels for particular
classes of transactions, account balances or disclosures;
c) Performance materiality; and
d) Any revision of (a)-(c) as the audit progressed.
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Questions?
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