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Vinod VyasVinod Vyas asked 3 years ago

Sir, please explain the concept of Performance Materiality.
What if Performance Materiality level exceeds the materiality level set for the FS as a whole.
Thank You.

3 Answers
Best Answer
RaviRavi Staff answered 3 years ago

performance materiality is generally 50% to 90% of materility level. so it can never be more than materiality level.
Profit 10,00,00,000
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.

Ashish PatelAshish Patel answered 2 years ago

Gap between materiality level and performance materiality level know as tolerable  deviation ?

RaviRavi Staff answered 2 years ago

no ashish there is no such concept.
tolerable misstatement and performance materiality are close to each other

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