ISA 320 (Revised) — Materiality in Planning and Performing an Audit

ISA 320 (Revised) DEALS with the auditor’s responsibility to APPLY the Concept of Materiality in planning and performing an ‘Audit‘ of Financial Statements.

Table of Contents

ISA 320 (Revised) – Introduction
- 1. Scope of this ISA
- 2. Effective Date
ISA 320 – Objective
ISA 320 – Definition
- 1. Performance Materiality
ISA 320 – Requirements
Synopsis

ISA 320 (Revised) – Introduction

1. Scope of this ISA

ISA 450 explains how Materiality is applied in evaluating the effect of identified Misstatements on the audit and of UNCORRECTED Misstatements if any on the ‘Financial Statements’.

2. Effective Date

This ISA is EFFECTIVE for audits of financial statements for periods beginning on or after December 15, 2009.

ISA 320 – Objective

The Objective of the ‘Auditor’ is to APPLY the concept of Materiality appropriately in planning and performing the audit.

ISA 320 – Definition

1. Performance Materiality

The Amount or Amount(s) set by the auditor at LESS than Materiality for the ‘Financial Statements’ as a whole.

ISA 320 – Requirements

1. Determining Materiality and Performance Materiality When Planning the Audit

When establishing the overall ‘AUDIT STRATEGY’, the auditor shall DETERMINE Materiality for the Financial Statements as a whole.

The auditor shall DETERMINE Performance Materiality for purposes of assessing the risks of Material Misstatement and determining the nature, timing and extent of further audit procedures.

2. Revision as the Audit Progresses

The auditor shall REVISE Materiality for the financial statements as a whole in the event of becoming aware of information during the audit.

If the auditor CONCLUDES that a lower Materiality for the financial statements as a whole than that initially determined is appropriate, the auditor shall DETERMINE whether it is necessary to REVISE ‘Performance Materiality‘.

3. Documentation

The ‘Auditor’ shall INCLUDE in the audit documentation:

Materiality for the financial statements as a whole;
If applicable, the Materiality level or levels for particular classes of transactions, account balances or disclosures;
Performance Materiality; AND
Any revision as the audit progressed.

Synopsis

ISA 320 ‘Materiality in Planning and Performing an Audit‘ DEALS with the auditor’s responsibility to apply the Concept of Materiality in planning and performing an ‘Audit‘ of Financial Statements.

[300-499] Risk Assessment and Response to Assessed Risk