Back to results for “Audit Sampling”
Auditing & Assurance › Audit Risk & Materiality

What is materiality in auditing?

Beginner

Answer

Materiality is the magnitude of an omission or misstatement that could influence the economic decisions of users taken on the basis of the financial statements. Auditors set materiality to plan procedures and evaluate misstatements: items above it are material. It has quantitative and qualitative dimensions.
Real-world example A $50,000 error is immaterial to a company with $500m revenue but material to a small business with $1m revenue.

Common follow-ups: Is materiality only about size? | Who are the 'users' materiality considers?