Materiality (Ref: Para. 15)Materiality (Ref: Para. 15)

Materiality (Ref: Para. 15)

1. The auditor needs to use professional judgement and consider qualitative and quantitative factors in determining materiality.
2. Ordinarily, the auditor’s consideration of materiality for a review of a financial report is based on the period financial data and accordingly, materiality based on interim period financial data may be less than materiality for annual financial data. If the entity’s business is subject to cyclical variations or if the financial results for the current period show an exceptional decrease or increase compared to prior periods and expected results for the current year, the auditor may, for example, conclude that materiality is more appropriately determined using a normalised figure for the period.
3. The auditor’s consideration of materiality, in evaluating the effects of misstatements, is a matter of professional judgement and is affected by the auditor’s perception of the financial information needs of users of the financial report.
4. If the applicable financial reporting framework contains a definition of materiality, it will ordinarily provide a frame of reference to the auditor when determining materiality for planning and performing the review.
5. The auditor needs, when relevant, to consider materiality from the perspective of both the entity and the consolidated entity.