Definition
AU-C 450 requires the auditor to accumulate misstatements identified during the audit, other than those that are clearly trivial. The auditor sets the threshold, usually as a small percentage of materiality, and documents it. Clearly trivial is not the same as immaterial, since it means an order of magnitude smaller, and matters of a different nature or circumstance, such as an illegal act, are never trivial because of size.
Why it matters in an audit or review
A threshold keeps the schedule of misstatements usable. Without it, the team would log every rounding difference. If it is set too high, errors with qualitative significance can slip through, and many small amounts can add to a material total unnoticed.
Example
Overall materiality is $400,000 (illustrative) and firm policy sets the clearly trivial level at 5 percent, so $20,000. An $8,000 mispricing of inventory is below the threshold and not logged. A $3,000 unrecorded payment to an officer is logged anyway, because it affects related party disclosure.
Common mistakes
- Setting the threshold close to performance materiality.
- Not tracking qualitative items that fall below it.
- Failing to reassess when materiality changes.
FAQ
Does the auditor tell management about trivial items?
Not required. Many auditors pass them on informally anyway.
Sources
- AICPA, AU-C Section 450, Evaluation of Misstatements Identified During the Audit (definition of clearly trivial; accumulation of misstatements)
- AICPA, AU-C Section 320, Materiality in Planning and Performing an Audit
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error