The Central Council of Institute of Chartered Accountants of India (ICAI) has approved the release of the utility to determine materiality by the Centre for Audit Quality (CAQ) of ICAI in the meeting held on 25th May 2023.
The utility will help the members to calculate the overall materiality for the assurance engagements based on the level of risk assessed. Also it will help in mapping the material misstatements on the opinion.
The utility starts with a disclaimer that the benchmark and the percentage range to be applied are purely suestive and the member is required to apply his professional judgment for assessing the risk of material misstatement at the engagement level and corresponding percentage of the benchmarks.
The utility includes the cover sheet, steps for determining materiality, guidance, calculating materiality, calculating material misstatements and related sheets.
As per the utility, the steps involved in determining materiality are:
As per the utility released, the auditor usually determined the two types of materiality i.e, overall materiality and performance materiality. Also stated that the auditor shall calculate the total material misstatements and consider its impact on the opinion of the financial markets.
The need for determining materiality is that an audit is an independent examination of the books and records of an entity or person with a view to expressing an opinion thereon. The auditor in this process is expected to confirm if the financial statements are free from material misstatements.
It is important to note that the ICAI is not in any way responsible for the result of any action taken on the basis of usage of the utility.
To download the utility for determining materiality, you have to fill the mandatory details asked by the ICAI in the google docs form email ID, name, membership number (not mandatory) and the contact number.
Get the google form here.
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