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Calculating Materiality UK

Calculating materiality is one of the fundamental concepts in auditing. MyWorkpapers' materiality workpaper provides you with an automated, but highly flexible workpaper, ensuring that you are able to effectively apply your professional judgement whilst calculating materiality, but also retain the advantages of being an electronic system.

The following section will only instruct how to use the functionality of the B41 Materiality workpaper in MyWorkpapers, and is not intended to instruct you on how to calculate materiality for the purposes of being compliant with the International Auditing Standards.

For the purpose of instructing you on how to use the B41 Materiality workpaper, we will break the completion of the workpaper into four distinct steps, being:

  1. Selecting the Benchmarks;

  2. Selecting the Basis for Determining Materiality;

  3. Calculating Overall Financial Statement Level Materiality; and

  4. Calculating Specific Materiality.

Before we begin with the specific details of the Materiality workpaper, please open B41 Materiality from the Working Paper Index.


Step 1 - Selecting the Benchmarks

  1. Update the Expected Current Year figures for the profit before tax and the net assets of your client using the input boxes provided

  2. Make any normalisation adjustments to the profit before tax using the input boxes provided

  3. Add any additional Benchmarks required by selecting them from the Benchmark menu, noting that any of the items selected are linked to the trial balance

  4. Add any custom Benchmarks required by selecting CUSTOM BENCHMARK, from the Select to add benchmark menu

  5. On the text area provided, enter the name of the custom benchmark required and press enter on your keyboard

  6. Manually enter in the values of the custom benchmark in the boxes provided

 


Step 2 - Selecting the Basis for Determining Materiality

  1. Ensure you have completed Step 1 Selecting the Benchmarks

  2. For each of the Benchmarks selected in Step 1, provide the percentage basis for determining materiality

  3. Insert comments as appropriate to support the choice of the basis for determining materiality

 


Step 3 - Calculating Overall Financial Statement Level Materiality

  1. Ensure you have completed Step 1 and 2 above

  2. From the dropdown menu provided, select the appropriate materiality base

  3. Manually round or edit the materiality figures, if applicable, by overriding the balances displayed

  4. Enter an appropriate percentage for the Performance Materiality and the Amount below which Misstatements are Clearly Trivial


Step 4 - Calculating Specific Materiality

  1. Ensure you have completed Step 1, 2 and 3 above

  2. Click on the Add Audit Area button

  3. In the box provided, insert a description of the specific area and the type of materiality being calculated (i.e. overall materiality for the area or performance materiality)

  4. Manually input the Materiality and the Performance Materiality for the specific area

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