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How to select Materialily Level

Gaurav (13 Points)

10 May 2007

Please guys help me figure out how to set up materialily levels for different companies are there any rule of thumb methods Please give me some examples

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3 Replies

Rhea (31 Points)
Replied 10 May 2007

There are no thumb rules for selecting materiality limits. Different audit firms follow different basis for calculating materiality limits.
For eg - It is calculated at certain rate on turnover or on fixed assets.

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aqopu (13 Points)
Replied 10 May 2007

The One says:

Rhea is correct. The One would like to add the factors which go onto determining the materiality level (refer AAS-13)

Nature of Business(turnover, size, transaction, etc), Audit Risk, Sampling Risk, Tolerable Error, Auditors judgement and experience with similar or same entity, Internal Controls, and Regulations (like Companies Act, Income Tax Act)