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CX-4: FINANCIAL STATEMENT MATERIALITY WORKSHEET
FOR PLANNING PURPOSES
1. This form should be completed for all audit engagements. See Section 203. The purpose of this form is to
determine and document the materiality amount that will be considered suitable for audit planning purposes.
2. Use amounts from the financial statements to be audited or the trial balance from which those financial
statements will be prepared whenever available. If not available, use annualized amounts from the most
recent interim financial statements. For revenue, use an annualized amount even if the period is shorter than
a year.
3. When current amounts are unavailable or when significant audit adjustments to client-prepared accounting
data are expected, use historical averages based on the past two or three years. (Attach the calculation on a
separate page.)
4. Based on your professional judgment, determine a planning materiality amount using the table on the
following sheet as a guideline. (Amounts should be rounded to two significant digits.)
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ASB 2/02 CX-4
Calculations
2. Tolerable Misstatement. Tolerable misstatement is used in computing sample sizes and in making other
scope decisions. As a rule of thumb, tolerable misstatement can be computed as follows:1
3. Individually Significant Items. The dollar amount used to identify individually significant dollar items can
be any amount up to tolerable misstatement. CX-7a provides guidance on determining individually significant
items for specific account balances or transaction classes.
1 If reliable estimates can be made of uncorrected known misstatement and likely misstatement, tolerable
misstatement may be completed as follows:
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ASB 2/02 CX-4
Example: If the base amount were $3.5 million, then the planning materiality amount would be as follows:
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