Page 58 - AA Integrated Workbook STUDENT 2018-19

Chapter 5 3

Materiality

Materiality: Misstatements, including omissions, are considered to be
material if they, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements.

Materiality

.

By size By nature

 ½ – 1 % Revenue  Compliance with
laws and
 5 – 10% Profit regulations

 1 – 2 % Total  Compliance with
assets debt covenants

 Turn a profit to a
loss

 Transactions with
directors

Performance materiality is an amount set at less than materiality for
the financial statements as a whole, to reduce the risk that the
aggregate of smaller misstatements in individual account balances or
classes of transactions could exceed materiality for the financial
statements as a whole.

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