In March 2016 Corporate Reporting Dialogue has presented a set of common principles of materiality statement, which participants may incorporate into their respective standards setting activities.
Materiality is a general and pervasive concept and is widely used in financial and non-financial reporting and for many other business purposes. For example, business contracts may include ‘material adverse change’ clauses, which may or may not be financial in nature.
In planning the audit of a corporation, an auditor will establish a materiality threshold for purposes of determining the scope of test procedures, which would be different from the materiality threshold the auditor will use for purposes of rendering the attest report on the fairness of the client’s financial statements taken as a whole.
Assessment of what is or is not material is primarily qualitative and therefore judgement is both critical and necessary. Quantitative materiality thresholds have a role in this process but generally are not dispositive by themselves.
Read the Statement here.