Materiality

Annex A – Materiality Template

Overall planning materiality

Step 1 Choose an appropriate

benchmark
Step 2 Choose which percentage to use
Step 3 Compute the overall planning
materiality

Overall performance materiality

Step 1 Compute the extent of

misstatements in prior year/s
Step 2 Select percentage to be used
Step 3 Compute the overall
performance materiality

Specific planning materiality and

performance materiality thresholds

Step 1 Determine specific planning

materiality, if necessary TEMPLATE
Step 2 Determine specific performance
materiality, if a specific
planning materiality is set Computation of Materiality Thresholds in
Financial Audit
Testing Threshold

Step 1 Identify the Risk of Material

Adopted thru COA Resolution No. 2019-016
Misstatement (RMM) for the dated 25 June 2019
accounts in the ARAPT
Step 2 Choose a percentage to use
within the given range
Step 3 Compute the testing threshold

Threshold for clearly trivial matters

The purpose of this template is to document the
Step 1 Select a percentage of the materiality thresholds used in audit, in accordance with
overall planning materiality to ISSAI 1320.14 and 1450.15.
use as the threshold for clearly
trivial matters
Step 2 Compute the threshold for
clearly trivial matters

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Annex A – Materiality Template

TEMPLATE
Computation of Materiality Thresholds in Financial Audit

Agency Name

Audit Period

Audit Team/ Group

Cluster/Region, Sector

Check one. (General Guidelines F to G)

Stand-Alone Agency  will determine and use: planning materiality,

performance materiality, testing threshold and
threshold for clearly trivial matters
Annual Audit Report
 for: planning, execution and reporting phases

Regional Office / Component

 will determine and use: planning materiality,
Management Letter/ Summary of Audit performance materiality, testing threshold and
threshold for clearly trivial matters
Observations and Recommendations
 for: planning and execution phases
(whichever may be applicable)

 will determine and use: planning materiality,

Head/Central Office (itself)
Management Letter (if applicable)
Whole Agency / Whole Group
performance materiality, testing threshold and
threshold for clearly trivial matters
 for: planning and execution phases
 using: estimates based on the financial statements of
the head office before consolidation
 will determine and use: overall planning materiality
 for: reporting phase
 using: estimates based on the consolidated/combined

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Annex A – Materiality Template

Consolidated Annual Audit Report financial statements of the whole agency

A. BASIS of COMPUTATION (General Guidelines C)

The auditor used the previous year’s financial statements as s/he sees that the current year’s
financial results are likely to be the same

The auditor used the interim financial statements for the period January 1 to _______________.

The auditor used annualized balances (see Definition of Terms, Item No. 20)

Others: The auditor used estimates based on _______________________________

____________________________________________________________________

____________________________________________________________________

B. OVERALL PLANNING MATERIALITY

1. Choose an appropriate benchmark (Specific Guidelines A.1.1)

Total Assets
Benchmark used
Total Expenditure
Total Revenue
Equity
Total Liabilities

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Annex A – Materiality Template

Retained Operating Surplus

Profit Before Tax

Reason(s) for benchmark selection (Specific Guidelines A.1.1.1-3)

Consider the following:

 The elements of the financial statements by which users will be interested in and will focus on
 The nature of the entity, its ownership structure and the way it is financed
 The relative volatility of the benchmark

2. Choose which percentage to use, whether the lower or higher end (Specific Guidelines
A.1.2)

Percentage of Benchmark Selected

Check one.

Percentage
Reasons for percentage selection (Specific
Benchmark
Guidelines A.1.2)
Lower Higher

Total Assets 0.5% 1%

Total Expenditure 0.5% 2%

Total Revenue 0.5% 2%

Equity 1% 2%

Total Liabilities 1% 2%

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Annex A – Materiality Template

Percentage of Benchmark Selected

Check one.

Percentage
Reasons for percentage selection (Specific
Benchmark
Guidelines A.1.2)
Lower Higher

Retained Operating Surplus 1% 5%

Profit before tax 1% 5%

3. Compute the overall planning materiality (Specific Guidelines A.1.3)

Benchmark (₱) Percentage Overall Planning Materiality (₱)

(a) (b) (a x b)

C. OVERALL PERFORMANCE MATERIALITY

1. Compute the extent of misstatements in the previous year (Specific Guidelines A.2.1)

Total Misstatements in Overall planning materiality of the Extent of misstatements in

previous year (₱) current year (₱) (Template B.3) previous year (%)

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Annex A – Materiality Template

(a) (b) a
( ) x 100
b

2. Select percentage to be used (Specific Guidelines A.2.2)

Performance Materiality
Extent of misstatements
(% of planning
in previous year
materiality)

0 – 40% 80%

40.01 – 100% 60%

Above 100% 50%

3. Compute the overall performance materiality (Specific Guidelines A.2.3)

Overall Planning Materiality Percentage Overall Performance

(₱) (Template B.3) materiality (₱)
(Template C.2)

(a) (b) (a x b)

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Annex A – Materiality Template

D. SPECIFIC PLANNING and PERFORMANCE MATERIALITY

1. Determine whether it is necessary to apply specific planning materiality (Specific

Guidelines A.3.1)

Total Assets

Total Expenditure

Total Revenue

Particular class of transaction / account Equity

balance/ disclosure
Total Liabilities

Retained Operating Surplus

Profit Before Tax

Amount (₱)

Reason/s for setting specific planning materiality

Select and explain at least one, whichever is/are applicable

Laws, regulations or the requirements of

the applicable financial reporting
framework affect users’ expectations

Key disclosures in relation to the industry

in which the entity operates

Disclosures of significant events and

important changes in operations

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Annex A – Materiality Template

2. Determine percentage to use (Specific Guidelines A.3.2)

Classes of transactions, account Percentag

balances or disclosures e

Total Assets 0.125%

Total Expenditure

Total Revenue

Equity 0.25%

Total Liabilities

Retained Operating Surplus

Profit Before Tax

3. Compute the specific planning materiality (Specific Guidelines A.3.3)

Class of transactions, account Specific Planning

Percentage
balance or disclosure (₱) Materiality (₱)

(a) (b) (a x b)

4. The value of specific planning materiality shall be lower than the overall planning
materiality; otherwise, specific planning materiality shall not be set.
5. If a specific planning materiality is set, determine specific performance materiality
(Specific Guidelines A.3.5)

Specific Planning Materiality Specific Performance

Percentage
(₱) materiality (₱)

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Annex A – Materiality Template

(a) (b) (a x b)

E. TESTING THRESHOLD (Specific Guidelines A.4)

Percent of
performance
Risk of Material Testing Threshold
materiality
Misstatement
Accounts used (Col. 3 x Performance
(From ARAPT) materiality)
(Table 5 of
guidelines)

(1) (2) (3) (4)

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Annex A – Materiality Template

Percent of
performance
Risk of Material Testing Threshold
materiality
Misstatement
Accounts used (Col. 3 x Performance
(From ARAPT) materiality)
(Table 5 of
guidelines)

(1) (2) (3) (4)

F. THRESHOLD for CLEARLY TRIVIAL MATTERS (if necessary) (Specific Guidelines

A.5)

1. Select a percentage of the overall planning materiality to use as the threshold for clearly
trivial matters (0.25-0.5%)
2. Compute threshold for clearly trivial matters

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Annex A – Materiality Template

Overall Planning Materiality Percentage

(Template B.3) (₱)
(0.25-0.5%) Threshold for clearly trivial matters (₱)

(a) (b) (a x b)

Prepared by: Reviewed by:

Audit Team Leader Date Supervising Auditor Date

Approved by:

Cluster/Regional Director Date

Indicate if thresholds were revised during the conduct of the audit and before evaluation of
misstatements (Specific Guidelines C):

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Annex A – Materiality Template

Revised? Reason/s (Specific Guidelines C.1)

Yes No

Overall Planning
Materiality

Overall Performance
Materiality

Specific Planning
Materiality

(if applicable)

Specific Performance
Materiality
(if applicable)

*Use additional sheet/s if necessary

If revised, state details of revisions.

Initial amount Final amount Remarks

Overall Planning Materiality

Overall Performance
Materiality

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Annex A – Materiality Template

Specific Planning Materiality

(if applicable)

Specific Performance
Materiality (if applicable)

Prepared by: Reviewed by:

Audit Team Leader Date Supervising Auditor Date

Approved by:

Cluster/Regional Director Date

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