Materiality in Planning and Performing an Audit

The objective of the auditor is to apply the concept of materiality appropriately in planning and performing the audit as per AU-C Section 320.08. 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. It is also possible that specific classes of transactions, account balances, or disclosures may exist for which misstatements at a lower amount than the materiality of the financial statements taken as a whole may influence the decisions of users, so the auditor must determine the materiality level for those items. During the audit, the auditor may become aware of information that indicates that a lower level of materiality is more appropriate. In that case, the auditor should consider the necessity of revising performance materiality and whether further audit procedures need to be considered.