Document ID: chunk:federal_register_of_legislation:F2023C01123:reg:9:p8
Version: federal_register_of_legislation:F2023C01123
Segment Type: reg
Provision Reference: reg 9 (pt 8/9)
Character Range: 26450–29513

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.

Performance Materiality (Ref: Para. 11)

A13.         Planning the audit solely to detect individually material misstatements overlooks the fact that the aggregate of individually immaterial misstatements may cause the financial report to be materially misstated, and leaves no margin for possible undetected misstatements.  Performance materiality (which, as defined, is one or more amounts) is set at less than materiality for the financial report as a whole to reduce aggregation risk to an appropriately low level.  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 judgement.  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)

A14.         Materiality for the financial report 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 report as a whole, the auditor revises that materiality.
[*]  Early adoption, in conjunction with ASA 315 Identifying and Assessing the Risks of Material Misstatement, permitted.
  [1]  See ASA 450 Evaluation of Misstatements Identified during the Audit.
[2]  See, for example, the AASB's Framework for the Preparation and Presentation of Financial Statements (July 2004).
[3]  See ASA 315 Identifying and Assessing the Risks of Material Misstatement, paragraphs A191‑A192.
  [4]  See ASA 450, paragraph A16.
  [5]  See ASA 230 Audit Documentation, paragraphs 8-11 and paragraph A6.
[6]  See ASA 200 Overall Objectives