(function(){ var HTML = [ '

', '

Step 1

', '

Financial statement extracts

', '

Enter the figures for the year under audit. Every result below is shown in the same units you enter.

', '

', 'Revenue', 'Profit before tax', 'Total assets', '

', '

', 'Currency', 'Figures are in', '

', 'Profit is not a meaningful benchmark — a not-for-profit entity, or only a small profit or loss', '

', '', '', '

', '

Step 2

', '

Benchmark ranges

', '', '

Benchmark	Lower	Upper

', '

Result

', '

Preliminary materiality

', '

Step 3

', '

Judgement factors

', '

Materiality is a matter of professional judgement. Tick what applies — each factor moves the suggested figure within the range above.

', '

', 'First year auditing this client', 'Figures are draft, not final', 'Listed or other public interest entity', 'Going concern or regulatory sensitivity', 'Known control deficiencies or high risk of misstatement', 'Recurring audit with few errors in prior years', 'Strong control environment', '

', '

Performance materiality

', 'Set at', '

', '

ISA 320 defines performance materiality as the amount set at less than materiality for the financial statements as a whole, to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. The standard sets no percentage — the range above reflects common practice.

', '

Test a misstatement

', 'Misstatement identified', '

', '

Material by nature

', '

Some items are material because of what they are, not how large they are. Where one of these applies, a numerical calculation is not the deciding factor.

', '

', 'Affects compliance with regulatory requirements', 'Affects compliance with debt covenants', 'Would turn a reported profit into a loss', 'Would turn a net asset position into net liabilities', 'Concerns transactions with directors', 'Concerns disclosure of legal claims or going concern', '

', '

Benchmarks and definitions follow ISA 320 Materiality in Planning and Performing an Audit. The percentages are the commonly used starting points — audit firms may apply different benchmarks or thresholds for a given client.

', '

'].join(''); function $(id){ return document.getElementById(id); } function val(id){ var e=$(id); if(!e) return 0; var v=parseFloat(e.value); return isFinite(v)?v:0; } function dpFor(n){ var a=Math.abs(n); return a>=100?0:a>=10?1:2; } function fmtD(n,dp){ return n.toLocaleString(undefined,{minimumFractionDigits:dp,maximumFractionDigits:dp}); } function isWhole(n){ return Math.abs(n - Math.round(n)) < 0.005; } function fmt(n){ if(!isFinite(n)) return '–'; return fmtD(n, isWhole(n) ? 0 : dpFor(n)); } function cur(){ var e=$('mc-cur'); return e ? e.value.trim() : String.fromCharCode(36); } function money(n){ return cur()+fmt(n); } function moneyPair(a,b){ var dp=dpFor(Math.max(Math.abs(a),Math.abs(b))); if(isWhole(a)&&isWhole(b)) dp=0; return [cur()+fmtD(a,dp), cur()+fmtD(b,dp)]; } function scaleLabel(){ var s=$('mc-scale'); var v=s?s.value:'k'; if(v==='k') return cur()+'000'; if(v==='m') return cur()+' millions'; return cur()+' units'; } function pctOf(part,whole){ if(!whole) return null; return part/whole*100; } function pctTxt(p){ if(p===null) return '–'; var dp=Math.abs(p)>=10?1:2; return p.toFixed(dp)+'%'; } function state(){ var rev=val('mc-rev'), pbt=val('mc-pbt'), ta=val('mc-ta'); var nfp=$('mc-nfp').checked; var B={ rev:{label:'Revenue', value:rev, lo:0.005, hi:0.01, loL:'½%', hiL:'1%'}, pbt:{label:'Profit before tax', value:Math.abs(pbt), lo:0.05, hi:0.10, loL:'5%', hiL:'10%'}, ta:{label:'Total assets', value:ta, lo:0.01, hi:0.02, loL:'1%', hiL:'2%'} }; var profitUnusable = nfp || !(pbt>0); var wanted = profitUnusable ? ['rev','ta'] : ['pbt','ta']; var used = wanted.filter(function(k){ return B[k].value>0; }); if(!used.length){ used = ['rev','pbt','ta'].filter(function(k){ return B[k].value>0; }); } return {B:B, used:used, profitUnusable:profitUnusable, nfp:nfp, any:(rev>0||Math.abs(pbt)>0||ta>0)}; } function judgePos(root){ var down=0, up=0; root.querySelectorAll('[data-dir]').forEach(function(c){ if(!c.checked) return; if(c.getAttribute('data-dir')==='down') down++; else up++; }); return Math.max(0, Math.min(1, 0.5 + 0.15*(up-down))); } function render(root){ var s=state(), B=s.B; var rows=''; ['rev','pbt','ta'].forEach(function(k){ var b=B[k], on=s.used.indexOf(k)>-1; if(!b.value){ rows += ''+b.label+'––'; return; } var pr=moneyPair(b.value*b.lo, b.value*b.hi); rows += ''+ ''+b.label+(on?' • used':'')+''+ ''+pr[0]+''+b.loL+''+ ''+pr[1]+''+b.hiL+''; }); $('mc-tbody').innerHTML = rows || 'Enter figures above.'; var basis=''; if(s.any){ if(s.profitUnusable){ basis = s.nfp ? 'Profit is not a meaningful benchmark here, so revenue and total assets drive the range.' : 'There is no profit before tax to work from, so revenue and total assets drive the range.'; } else { basis = 'Materiality is not normally based on revenue, so profit before tax and total assets drive the range. Tick the box above if profit is not meaningful for this entity.'; } basis += ' All figures in ' + scaleLabel() + '.'; } $('mc-basis').innerHTML = basis; var out=$('mc-result'); if(!s.any || !s.used.length){ out.innerHTML = '

Enter the figures to see a suggested materiality range.

'; $('mc-pm').innerHTML = '

Awaiting figures.

'; window.__mcPoint = 0; } else { var lows = s.used.map(function(k){ return B[k].value*B[k].lo; }); var highs= s.used.map(function(k){ return B[k].value*B[k].hi; }); var lo=Math.max.apply(null,lows), hi=Math.min.apply(null,highs); var overlaps = lo<=hi; var bandLo = overlaps?lo:Math.min.apply(null,highs); var bandHi = overlaps?hi:Math.max.apply(null,lows); var pos=judgePos(root); var point=bandLo+pos*(bandHi-bandLo); var posWord = pos<0.34?'the lower end':pos>0.66?'the upper end':'the middle'; var bp=moneyPair(bandLo,bandHi); var html = '

Suggested range'+bp[0]+' – '+bp[1]+'

'; html += '

Suggested figure: '+money(point)+' — '+posWord+' of the range, based on the judgement factors ticked below.

'; if(!overlaps){ html += '

The benchmark ranges do not overlap, so there is no single obviously suitable figure. A level between them is a reasonable starting point, but this is a matter for judgement and documentation.

'; } var parts=[]; s.used.forEach(function(k){ var p=pctOf(point,B[k].value); if(p!==null) parts.push(pctTxt(p)+' of '+B[k].label.toLowerCase()); }); if(parts.length) html += '

That figure is '+parts.join(' and ')+'.

'; out.innerHTML = html; var pmPct=parseFloat($('mc-pmpct').value)/100; $('mc-pm').innerHTML = '

Performance materiality'+money(point*pmPct)+'

'+ '

'+Math.round(pmPct*100)+'% of '+money(point)+'. Use this lower threshold when designing and performing audit procedures.

'; window.__mcPoint = point; } var mis=val('mc-mis'), t=$('mc-test'); if(!mis || !s.any){ t.innerHTML = '

Enter a misstatement to test it against the benchmarks.

'; } else { var trows='', anyMat=false; ['rev','pbt','ta'].forEach(function(k){ var b=B[k]; if(!b.value) return; var thr=b.value*b.lo, mat=Math.abs(mis)>thr; if(mat) anyMat=true; trows += ''+b.loL+' of '+b.label.toLowerCase()+''+money(thr)+''+ (mat?'Material':'Not material')+''; }); var h=''+trows+'

Threshold	Amount

'; h += '

'+(anyMat?'Treat as material.':'Not material by size.')+' '+ (anyMat?'The misstatement exceeds at least one of the lower-end thresholds, so on the conventional approach it is assumed to be material.' :'The misstatement falls below every lower-end threshold. Still consider whether it is material by nature.')+'

'; if(window.__mcPoint){ h += '

Against your suggested materiality of '+money(window.__mcPoint)+', this misstatement is '+pctTxt(pctOf(Math.abs(mis),window.__mcPoint))+' of that figure.

'; } t.innerHTML=h; } var nat=root.querySelectorAll('#mc-nature input:checked').length; $('mc-nature-out').innerHTML = nat ? '

Material by nature. '+nat+' factor'+(nat>1?'s':'')+' ticked — the item should be treated as material regardless of its size, and the reason documented.

' : ''; } function init(){ var mount=document.getElementById('wa-mat-calc'); if(!mount){ var content=document.querySelectorAll('[data-lp-content]'); var host=content.length?content[content.length-1]:document.querySelector('[data-lp-col]'); if(!host) return; mount=document.createElement('div'); mount.id='wa-mat-calc'; host.appendChild(mount); } if(mount.getAttribute('data-ready')) return; mount.setAttribute('data-ready','1'); mount.innerHTML=HTML; var redraw=function(){ render(mount); }; mount.addEventListener('input', redraw); mount.addEventListener('change', redraw); $('mc-example').addEventListener('click', function(){ $('mc-rev').value=21960; $('mc-pbt').value=1048; $('mc-ta').value=9697; $('mc-scale').value='k'; $('mc-nfp').checked=false; redraw(); }); $('mc-reset').addEventListener('click', function(){ ['mc-rev','mc-pbt','mc-ta','mc-mis'].forEach(function(id){ $(id).value=''; }); mount.querySelectorAll('input[type=checkbox]').forEach(function(c){ c.checked=false; }); $('mc-pmpct').value='75'; redraw(); }); redraw(); } if(document.readyState==='loading'){ document.addEventListener('DOMContentLoaded', init); } else { init(); } setTimeout(init,600); setTimeout(init,1800); })();

Materiality Calculator