SA 320 — Materiality in Planning and Performing an Audit

Issued by ICAI AASB · Planning

Setting overall materiality, performance materiality, and the threshold for clearly trivial misstatements.

Objective

To apply the concept of materiality appropriately in planning and performing the audit.

Key requirements

Overall materiality: benchmark + percentage (PBT 5%, turnover 0.5-1%, equity 1-3% — choose appropriate)
Performance materiality: 50-75% of overall materiality (lower for higher risk)
Clearly trivial threshold: 3-5% of overall materiality
Specific materiality for particular classes of transactions, account balances or disclosures
Revision of materiality as the audit progresses if circumstances change

Typical procedures

Materiality memorandum signed before fieldwork
Documented rationale for the chosen benchmark
Update on the materiality assumption based on actual results

Common pitfalls

PBT used as benchmark in a loss-making year without alternative consideration
Performance materiality not actually lower than overall — defeating the purpose
No specific materiality for related-party transactions despite Section 188 disclosure thresholds

On CORAA

ICAI band-based materiality, three-step memo, locked before fieldwork. Becomes a documented artefact in the working paper. Open the matching module →

SA 320 in practice

SA 320 sits in the Planning phase of the audit. The Standards on Auditing are issued by the ICAI Auditing and Assurance Standards Board (AASB) and deemed to be prescribed by the Central Government under Section 143(10) of the Companies Act 2013. Compliance with SAs is mandatory for every audit conducted by a Chartered Accountant in India.

For authoritative text, refer to the ICAI AASB Compendium of Standards on Auditing at icai.org.

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SA 330 — The Auditor's Responses to Assessed Risks