The materiality threshold in audits refers to the benchmark used to obtain reasonable assurance that an audit does not fail to detect any material misstatement that can significantly impact the economic decision of users of financial statements.
Determining materiality involves the exercise of professional judgment. A percentage is often applied to a chosen benchmark as a starting point in determining materiality for the financial statements as a whole. While exercising the professional judgement there are many factors which the auditor has to consider.
Some of them are:
● Size and nature of entity
● Environment in which entity operates
● Complexity of the transactions involved
