AU ‐C 320 Materiality in Planning and Performing an Audit

While AU-C 450 contains guidance on how to use materiality when evaluating the effect of identified misstatements, AU-C 320 offers auditors guidance in using materiality when planning and performing the audit. Audit risk is the risk that the financial statements are materially misstated and the auditor expresses an inappropriate audit opinion. In considering audit risk at the overall financial statement level, the auditor should consider risks of material misstatement that relate pervasively to the financial statements taken as a whole and often potentially relate to many assertions. Determining materiality in the planning phase is a matter of professional judgment. The auditor should determine a materiality level for the financial statements taken as a whole when establishing the overall audit strategy. During the audit, the auditor may become aware of information that indicates that a lower level of materiality is more appropriate.