How do I use the Materiality (2-300) workpaper and how does it impact screens like Data and Risk Assessment?
What is the materiality workpaper for?
The materiality workpaper can be used to assist you with the planning and the revised assessment of your audit. The materiality assessment that you determine can also influence the Trial Balance, Risk Assessment and other workpapers such as 4-200 Summary of Uncorrected Misstatements. It is important to comment appropriately on the materiality threshold you determine within the 2-300 workpaper.
How to use the materiality workpapers?
1. Open the 2-300 Materiality document.2. At the top left corner, you can switch between a planning or revised materiality, as well as the option to show prior year balances.
3. To add principal users and factors to consider, click on the areas shown.
Select + add row to add a new row.
To determine your basis, we need to select a component from the Mapping.
Select + Financial materiality basis or + other basis to add a materiality item.
For example, in the image below, we have chosen Revenue and Profit as our basis.
The Benchmark applied is 2.5% and 5%. We have determined from this that our Overall Materiality will be $170,000 (Note: we have not simply added the two together. This is our final Audit Assessment based on the information presented).
The audit assessment of $170,000 is now entered in the Conclusions box. This is the field that Agile Audit will utilise for Overall Materiality.
Important: It is recommended that you always document in the Comments box below your reasoning for your overall materiality determination.
Performance Materiality
To determine a Performance Materiality we can utilise the calculation already established for Overall Materiality. If we use our example above, we have an overall materiality at $170,000. If we apply a benchmark of 95% to the Overall Materiality calculation, Possible Materiality for Performance will be calculated as $161,500. We can utilise this amount or further make another audit assessment. Like we did with Overall, the Performance Materiality is entered into the Conclusions box.
To determine a Performance Materiality we can utilise the calculation already established for Overall Materiality. If we use our example above, we have an overall materiality at $170,000. If we apply a benchmark of 95% to the Overall Materiality calculation, Possible Materiality for Performance will be calculated as $161,500. We can utilise this amount or further make another audit assessment. Like we did with Overall, the Performance Materiality is entered into the Conclusions box.
Important: It is recommended that you always document in the Comments box below your reasoning for your performance materiality determination.
7. Trivial misstatement
You may wish to designate an amount below which misstatements would be clearly trivial and would not need to be accumulated as you expect such amounts would not have any material effect on the financial statements. This is where you can apply a Trivial misstatement. For this example, we decided to use 1% of Overall materiality but each firm will have their own methodology. The Conclusions and Comments boxes were both filled out appropriately as seen in the image below.
You may wish to designate an amount below which misstatements would be clearly trivial and would not need to be accumulated as you expect such amounts would not have any material effect on the financial statements. This is where you can apply a Trivial misstatement. For this example, we decided to use 1% of Overall materiality but each firm will have their own methodology. The Conclusions and Comments boxes were both filled out appropriately as seen in the image below.
The Trivial misstatement does feed into the 4-200 Summary of Misstatements worksheet.
8. Specific circumstances
Sometimes a financial area may be material by nature. Or alternatively the level of complexity for a financial statement area may be below the overall and performance threshold, but are still considered risky. This is where you can adopt the Materiality for specific circumstances.
In this example, we have identified Cash and PPE. If we look at Cash. If you believe Cash to be material by nature, despite it being below the $161,500 / $170,000 threshold at $92,188, you can capture this by utilising the Specific Circumstances area of 2-300.
Sometimes a financial area may be material by nature. Or alternatively the level of complexity for a financial statement area may be below the overall and performance threshold, but are still considered risky. This is where you can adopt the Materiality for specific circumstances.
In this example, we have identified Cash and PPE. If we look at Cash. If you believe Cash to be material by nature, despite it being below the $161,500 / $170,000 threshold at $92,188, you can capture this by utilising the Specific Circumstances area of 2-300.
Note: The Data page will be impacted if we activate the Materiality indicators and/or filters.
9. Changing 2-300 to revised
From the top of the document, change the option from Planning to Revised and you will see the Revised box appear for Overall Materiality, Performance Materiality and Specific Circumstances.
Adjust accordingly and remember to update the Comments box on any changes to the revised over planning materiality determinations.
Note: The Trivial misstatement balance does not get disclosed between Planning or Revised. It is the same balance.
Adjust accordingly and remember to update the Comments box on any changes to the revised over planning materiality determinations.
Note: The Trivial misstatement balance does not get disclosed between Planning or Revised. It is the same balance.
How does materiality impact screens like Data?
In the Data screen of Agile Audit we have a couple of addition settings and filters that can be applied to organise the screen. Open Data and;a) Select Indicators and check Materiality; and
b) Select Filters and check Materiality.
You have now organised your Data screen to only show you accounts that are material. If you consider the image below, we have account # 1020 showing with a balance that is below our Materiality threshold of $161,500 / 170,000. This has been classed as material due to the Specific Circumstances we applied in 2-300.
How does materiality impact screens like Risk Assessment?
In the Risk Assessment screen of Agile Audit we have our primary financial statement areas. In here, like the Data screen, we can apply a filter using the 
button.
From here we can choose to only look at material financial statement areas.
How does materiality impact screens like Analysis?
The graphs within the Analysis screen will illustrate materiality with the use of these graphics 
.
. The unbroken line represents Overall Materiality and the broken line represents Performance Materiality.
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