Sir, please explain the concept of Performance Materiality.
What if Performance Materiality level exceeds the materiality level set for the FS as a whole.
performance materiality is generally 50% to 90% of materility level. so it can never be more than materiality level.
Materiality–> 5% of profits = 5% x 10,00,000 = 50,000
Performance Materiality–> 60% of Materiality Level = 50,000 x 60% = 30,000
While “performing” risk assesment, response to risk and evidence collection team will use 30,000 as materiality level.
But for reporting purpose, materiality will be 50,000
this is done so that we create buffer / gap between actual materiality and performance materiality where undetected and uncorrected misstatements are covered.
Gap between materiality level and performance materiality level know as tolerable deviation ?