DevyaniDevyani asked 1 year ago
3 Answers
RaviRavi Staff answered 1 year ago

Performance Materiality is generally 50% to 90% on Materiality.
It is computer for financial statement level materiality and also specific area level / Transaction / Balance /  Disclosure level materiality if any.
so its computed for all materiality levels we have determined.

DevyaniDevyani answered 1 year ago

So auditor does audit as per Performance Materiality in each and every area. He just doesn’t take materiality level;  instead he takes Performance Materiality as the base.?

RaviRavi Staff answered 1 year ago

suppose materiality is 10,00,000 and performance materiality is 6,00,000 So GAP is for 4,00,000
now auditor has to evaluate whether all misstatements are within limit of 10,00,000
material misstatements = detected misstatements + undetected misstatements
for this he has to ensure that detected misstatements are within limit of performance materiality of 6,00,000 otherwise modify opinion
now he can only predict how much will be undetected misstatements as per experience and circumstances and then he decides GAP and remaining is performance materiality, so than undetected misstatements are covered in the GAP 
so we can say that performance materiality (6,00,000) is for detected misstatements
GAP is for (4,00,000) undetected misstatements
and materiality (10,00,000) is for detected & undetected materiality

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