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Question
The range of percentages used in calculating materiality, what is its sources?
Is it a guidance issued by SAICA or PAAb/IRBA or is it a standard.

The ranges are as follows:
Revenue (0.25%-1%)
Expenditure (0.25%-1%)
Net Profit(2.5%-10)
Total Assets (0.5%-2%)

Could you please give me a full details of its source?

Answer
Dear member, materiality is a subjective measure (based on professional judgment) that is required to be determined on an engagement by engagement basis by the auditor directly involved in such audit, based on sufficient appropriate evidence presented to him (source) and dependent of the risks identified pertaining to the engagement. The standard on materiality (i.e. ISA 320) does not prescribe the percentage ranges. However, an example was considered on the calculation of materiality in an old discussion paper 6 issued in July of 1984, which was later adopted by academics and the likes to suggest ranges.

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