Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
Specific Performance Materiality
This is the same as the performance materiality discussed above, except that it relates <strong>to</strong> the amounts set
for specific materiality. Specific performance materiality would be set at a smaller amount than specific
materiality, <strong>to</strong> ensure sufficient audit work is performed <strong>to</strong> reduce <strong>to</strong> an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds the specific materiality.
7.6 Documentation of Materiality
Paragraph #
Relevant Extracts from ISAs
320.14 The audi<strong>to</strong>r shall include in the audit documentation the following amounts and the fac<strong>to</strong>rs
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.
Because materiality amounts are based on the audi<strong>to</strong>r’s professional judgment, it is important that the fac<strong>to</strong>rs
and amounts involved in determining materiality at the various levels be properly documented. This would
typically occur as follows:
• During the planning phase, when decisions are made about the extent of work required.
• During the audit, when, based on audit findings, revisions may be required <strong>to</strong> either overall materiality
or performance materiality for particular classes of transactions, account balances, or disclosures.
Documentation would address:
1. The users of the financial statements;
2. The fac<strong>to</strong>rs used in determining:
• Materiality for the financial statements as a whole and, if applicable, the materiality level or levels
for particular classes of transactions, account balances, or disclosures;
• Performance materiality; and
3. Any revision of materiality amounts in point 2 above as the audit progressed.