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
1 – Annex A
Materiality
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) performance materiality, testing threshold and
threshold for clearly trivial matters
Management Letter (if applicable)
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
Whole Agency / Whole Group for: reporting phase
using: estimates based on the consolidated/combined
2 – Annex A
Materiality
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
3 – Annex A
Materiality
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%
4 – Annex A
Materiality
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 (%)
5 – Annex A
Materiality
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)
6 – Annex A
Materiality
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
7 – Annex A
Materiality
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 (₱)
8 – Annex A
Materiality
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)
9 – Annex A
Materiality
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
10 – Annex A
Materiality
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):
11 – Annex A
Materiality
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
12 – Annex A
Materiality
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
13 – Annex A
