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    Psa 320

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    kris m
    The document discusses performance materiality and the revision of materiality during an audit. It states that performance materiality is set at an amount lower than materiality for the financial statements to reduce the risk that aggregate uncorrected misstatements exceed materiality. It also notes that materiality may need to be revised during the audit if circumstances change or if the auditor gains a better understanding of the entity through further audit procedures. For example, materiality may be revised if anticipated financial results used initially are likely to be substantially different than actual results.

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    Psa 320

    Uploaded by

    kris m
    33 views2 pages
    The document discusses performance materiality and the revision of materiality during an audit. It states that performance materiality is set at an amount lower than materiality for the financial statements to reduce the risk that aggregate uncorrected misstatements exceed materiality. It also notes that materiality may need to be revised during the audit if circumstances change or if the auditor gains a better understanding of the entity through further audit procedures. For example, materiality may be revised if anticipated financial results used initially are likely to be substantially different than actual results.

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    psa 320

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    The document discusses performance materiality and the revision of materiality during an audit. It states that performance materiality is set at an amount lower than materiality for the financial statements to reduce the risk that aggregate uncorrected misstatements exceed materiality. It also notes that materiality may need to be revised during the audit if circumstances change or if the auditor gains a better understanding of the entity through further audit procedures. For example, materiality may be revised if anticipated financial results used initially are likely to be substantially different than actual results.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    33 views2 pages

    Psa 320

    Uploaded by

    kris m
    The document discusses performance materiality and the revision of materiality during an audit. It states that performance materiality is set at an amount lower than materiality for the financial statements to reduce the risk that aggregate uncorrected misstatements exceed materiality. It also notes that materiality may need to be revised during the audit if circumstances change or if the auditor gains a better understanding of the entity through further audit procedures. For example, materiality may be revised if anticipated financial results used initially are likely to be substantially different than actual results.

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    A11.

    In considering whether, in the specific circumstances of the entity, such classes of


    transactions, account balances or disclosures exist, the auditor may find it useful
    to obtain an understanding of the views and expectations of those charged with
    governance and management.
    10
    PSA 320 (Revised and Redrafted)
    Performance Materiality (Ref: Para. 11)
    A12. Planning the audit solely to detect individually material misstatements overlooks
    the fact that the aggregate of individually immaterial misstatements may cause the
    financial statements to be materially misstated, and leaves no margin for possible
    undetected misstatements. Performance materiality (which, as defined, is one or
    more amounts) is set to reduce to an appropriately low level the probability that
    the aggregate of uncorrected and undetected misstatements in the financial
    statements exceeds materiality for the financial statements as a whole. Similarly,
    performance materiality relating to a materiality level determined for a particular
    class of transactions, account balance or disclosure is set to reduce to an
    appropriately low level the probability that the aggregate of uncorrected and
    undetected misstatements in that particular class of transactions, account balance
    or disclosure exceeds the materiality level for that particular class of transactions,
    account balance or disclosure. The determination of performance materiality is not
    a simple mechanical calculation and involves the exercise of professional
    judgment. It is affected by the auditor’s understanding of the entity, updated
    during the performance of the risk assessment procedures; and the nature and
    extent of misstatements identified in previous audits and thereby the auditor’s
    expectations in relation to misstatements in the current period.
    Revision as the Audit Progresses (Ref: Para. 12)
    A13. 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) may need to be revised as a result of a change in circumstances
    that occurred during the audit (for example, a decision to dispose of a major part
    of the entity’s business), new information, or a change in the auditor’s
    understanding of the entity and its operations as a result of performing further
    audit procedures. For example, if during the audit it appears as though actual
    financial results are likely to be substantially different from the anticipated period
    end financial results that were used initially to determine materiality for the
    financial statements as a whole, the auditor revises that materiality.
    Acknowledgment
    This PSA is based on International Standard on Auditing 320 (Revised and Redrafted),
    “Materiality in Planning and Performing an Audit,” issued by the International Auditing
    and Assurance Standards Board.
    There are no significant differences between this PSA 320 (Revised and Redrafted) and
    ISA 320 (Revised and Redrafted).
    11
    PSA 320 (Revised and Redrafted)
    This PSA 320 (Revised and Redrafted), “Materiality in Planning and Performing an
    Audit,” was unanimously approved for adoption on October 27, 2008 by the members of
    the Auditing and Assurance Standards Council.
    Benjamin R. Punongbayan, Chairman
    Felicidad A. Abad Antonio P. Acyatan
    Erwin Vincent G. Alcala Froilan G. Ampil
    David L. Balangue Ma. Gracia F. Casals-Diaz
    Eliseo A. Fernandez Jaime P. Naranjo
    Ma. Cecilia F. Ortiz Nestorio C. Roraldo
    Joaquin P. Tolentino Editha O. Tuason
    Jaime E. Ysmael

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