In short
Performance materiality is an amount set below overall materiality to reduce, to an appropriately low level, the risk that uncorrected and undetected misstatements together exceed materiality for the financial statements as a whole.
Key takeaways
- It is used to plan the nature, timing and extent of audit procedures.
- It is often set at a percentage of overall materiality, depending on risk and expected misstatements.
- It can be set at different levels for particular accounts or disclosures.
Where it's tested
AUD: Audit Planning & Materiality — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Why does an auditor set performance materiality at an amount lower than overall materiality?