Question: Audit planning - materiality Can you please explain overall planning materiality, performance materiality and tolerable misstatement and materiality threshold? and provide examples. This topic is

Audit planning - materiality

Can you please explain overall planning materiality, performance materiality and tolerable misstatement and materiality threshold? and provide examples. This topic is really confusing me.

Establish overall planning materiality, The $ amount of materiality, $ deemed material for financial statements as a whole

- Ex. Overall planning materiality - $100,000

- If the whole financial statements are overstated by $100,000 this is material and would affect the decisions of financial statement users.

- This 100k is the amount we have to designate materiality for each account, and then to each line

Performance materiality

- $ amount of materiality at the account level, so a new materiality threshold of $75,000 so we look at ex. inventory

Tolerable misstatement

- Looking at a specific line amount ex. Revenues

- Our materiality threshold is $3,000, this 3k overstates or understates revenues this amount would be material to us

Materiality threshold - the amount of materiality set that would affect the decisions of financial users

- Ex. $10,000 materiality threshold. Revenue is understated by $500 then this is not material

These are my notes, but they don't make sense. If there's a way to make this make sense it would help a lot. for some reason I can't put the pieces together

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