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
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
Chartered Accountant (Institute of Chartered Accountants of Pakistan)
Bachelor of Accounting Honours (Asia e University, Malaysia)