COMPUTATION OF MATERIALITY THRESHOLDS IN FINANCIAL AUDIT Agency Name Department of Education Audit Period January 1 to December 31, 2019 Audit Team/Group DepEd 1 Audit Group Cluster/Region, Sector Cluster 5, National Government Sector ‘Check one. (General Guidelines F to G) Stand-Alone Agency will determine and use: planning materiality, performance materiality, testing threshold and Observation and Recommendations (whichever may be applicable) Annual Audit Report threshold for clearly trivial matters ‘for: planning, execution and reporting phases Regional Office / Component : _ will determine and use: planning materiality, ao. performance materiality, testing threshold and threshold for clearly trivial matters ‘or: planning and execution phases Head/Central Office (itself) |_| | Management Letter (if applicable) * for: planning and execution phases will determine and use: planning materiality, performance materiality, testing threshold and threshold for clearly trivial matters using: estimates based on the financial statements of the head office before consolidation Whole Agency / Whole Group Wh | consotidated tnnuat Audit Report will determine and use: overall planning materiality ‘for: reporting phases using: estimates based += on _the consolidation/combined financial statements of the whole agency A. BASIS OF COMPUTATION (General Guidelines C) [Ej | {te ausitor used the previous year’s financial statements as s/he sees that the current year's financial results are likely to be the same |__| | tthe auditor used the interim financial statements for the period January 1 to November 30,2019. | {_]] 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 4.1.1) Total Assets = TB Fotal Expenditure Lj Total Revenue rd LL) Equity Total Liabilities Benchmark used Retained Operating Surplus Profit Before Tax Reason(s) for benchmark selection (Specific Guidelines A.1.1.1-3) Consider the followin; ‘© 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 Total Expenditure was selected as the most appropriate benchmark since the agency is not a profitoriented entity ‘The DepEd is an expense driven agency which is tasked to provide the framework for the governance of basic ‘education. It formulates, plans, implements, and coordinates the policies, plans, programs and projects in the areas of formal and non-formal basic education. It supervises all elementary and secondary education institutions, including alternative learning systems, both public and private, and provides for the establishment and maintenance ofa complete, adequate, and integrated system of basic education relevant to the goals of national development. 2. Choose which percentage to use, whether the lower or higher end (Specific Guidelines A. 1.2) Cc Percentage of Benchmark Selected Check one Percentage : Benchmark Tae Reasons for percentage selection Total Asset [] os%| [~ ] 1% Paragraph 12 of ISAT 1320 requires the auditor to revise materiality for the financial statements as a whole in the . —) 294, | event of becoming aware of information during the audit Toll age {MMM 05%6| (7) 2 | Sects met mat ug at ent amount (or amounts) initially. The use of conservative approach is to provide buffer when revising, if applicable, materiality when year-end balance of Total Expenditure differs materially. Total Revenue | [| 0.5% | [~~] 2% | Based on the results of prior year audit engagement U including the high volume of transactions of the Department, these factors suggest that lower materiality threshold should be used. Equity [ 1% 2%Percentage of Benchmark Selected Check one. Percentage Benchmark cae Higher Reasons for percentage selection ‘Total Liabilities ‘| 1%} [] % Retained Operating %|[_ | 5% ‘Surplus 3. Compute the overall planning materiality (Specific Guidelines A.1.3) ‘Overall Planning Funds Booeee © Pereentge Materality ®) _ eo? | f@*b) All Funds BP 421,090,340,897.31 5% B2,105,451,704.49 * Overall Planning Materiality computed only for purposes of determining testing threshold C. OVERALL PERFORMANCE MATERIALITY 1. Compute the extent of misstatements in the previous year (Specific Guidelines 4.2.1) Total Misstatements in | Overall planning materiality of | _ Extent of misstatements in previous year (P) the current year (P) (Template previous year (%) @) B3) %) 5100 ) ® P 4,415,306,512.38 P2,105,451,704.49 210% 2. Select percentage to be used (Specific Guidelines 4.2.2) Extent of Misstatements | Performance Materiality in Previous Year (% of planning materiality) [a] 0-40% 80% CJ 40.01 — 100% 60% [J Above 100% 50% 3. Compute the overall performance materiality (Specific Guidelines A.2.3) Overall Planning Overall Performance Materiality (P) Percentage : Funds (Template B.3) ©) Materiality (P) @) (axb) All Funds P2,105,451,704.49 50% P-1,052,725,852.24 ¥ Computed only for purposes of determining testing thresholdD, SPECIFIC PLANNING AND PERFORMANCE MATERIALITY Not Applicable - Specific Planning Materialty is computed and applied per Regional Office Proper (ROP)/Schools Division Office (SDO) E, TESTING THRESHOLD — Not Applicable - Testing Thresholds are computed and applied per ROP/SDO F, THRESHOLD FOR CLEARLY TRIVIAL MATTERS (if necessary) (Specific Guidelines A.5) ‘Not Applicable - Thresholds for Clearly Trivial Matters are computed and applied per ROP/SDO. Prepared by: MIGUELAS.BAON _ September 3, 2019 Supervising Auditor Date Approved by: ELINORE C. LAVILLA ‘Cluster Director Reviewed by: ELENITA C. ABESAMIS Assistant Cluster Director September 5, 2019 Date September 5. 2019 Date